Consumer Guides		Government Guides
Consumer Issues	Resources and Information From Around The Nation	Consumer Info

What are the types of permanent insurance? Whole Life or ordinary life is the most common type of permanent insurance. The premiums generally remain constant over the life of the policy and must be paid periodically in the amount indicated in the policy. Universal life or adjustable life allows you, after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums or maximums. You also can reduce or increase the death benefit more easily than under a traditional whole life policy. (To increase your death benefit, the insurance company usually requires you to furnish satisfactory evidence of your continued good health. Variable Life provides death benefits and cash values that vary with the performance of a portfolio of investments. You can allocate your premiums among a variety of investments offering different degrees of risk and reward -- stocks, bonds, combinations of both, or accounts that guarantee interest and principal. You will receive a prospectus in conjunction with the sale of this product. The cash value of a variable life policy is not guaranteed and the policyholder bears the risk. However, by choosing among the available fund options, you can allocate assets to meet your objectives and risk tolerance. Good investment performance will lead to higher cash values and death benefits. If the specified investments perform poorly, cash values and benefits will drop. Some policies guarantee that death benefits cannot fall below a minimum level. There are both universal life and whole life versions of variable life.

What are the advantages and disadvantages of term and permanent insurance? The following points can help you determine which type of insurance best suites your needs.

Term Insurance

Advantages

• Initial premiums generally are lower than those for permanent insurance, allowing you to buy higher levels of coverage at a younger age when the need for protection often is greatest
• It's good for covering needs that will disappear in time, such as mortgages or car loans.

Disadvantages

• Premiums increase as you grow older.
• Coverage may terminate at the end of the term or become too expensive to continue.
• The policy generally doesn't offer cash value or paid-up insurance.

Permanent Insurance

Advantages

• As long as the premiums are paid, protection is guaranteed for life.
• Premium costs can be fixed or flexible to meet personal financial needs.
• The policy accumulates a cash value against which you can borrow. (Loans must be paid back with interest or your beneficiaries will receive a reduced death benefit.) You can borrow against the policy's cash value to pay premiums or use the cash value to provide paid-up insurance.
• The policy's cash value can be surrendered -- in total or in part -- for cash or converted into an annuity. (An annuity is an insurance product that provides an income for a person's lifetime or a specified period.)
• A Provision or "rider" can be added to a policy that gives you the option to purchase additional insurance without taking a medical exam or having to furnish evidence of insurability

Disadvantages

• Required premium levels may make it hard to buy enough protection.
• It may be more costly than term insurance if you don't keep it long enough.

After you have though about your financial needs and become familiar with the basic types of life insurance, it's time to choose a company and agent.

 

What You Should Know About Buying Life Insurance What is Term Life Insurance? Permanent Life Insurance Where do I Buy Life Insurance? Policy Illustrations Premiums and Riders Buying Tips Contacts for more questions