Contemplation often makes life miserable. We should act more, think less, and stop watching ourselves live. ~Nicolas de Chamfort
People often get a life insurance policy to ensure that their loved ones will be taken care of in case of a untimely death. A life insurance company generally offers two types of insurance policies: Term Life Insurance and Permanent Life Insurance.
Term Life Insurance
Term Life Insurance provides death protection for a stated time period, or term.
- Good choice for short-range goals
- Provides temporary life insurance protection on a limited budget
- Premiums increase when the policy is renewed
- Can be converted to a permanent policy at any time prior to age 75 (subject to established minimums)
Permanent Life Insurance
Permanent life insurance provides death protection for as long as you live.
- Good choice for long-range goals
- Guaranteed cash values can provide money later on to help with temporary needs or emergencies- Level premiums
When deciding which type of life insurance would best meet your need, four basic features should be considered:
1. Death Benefit
- Term life insurance provides a death benefit for a stated period of time
- Permanent life insurance provides a death benefit for as long as you live
2. Premium
- Permanent life insurance premiums are generally level and payable for life
- Term life insurance premiums will increase over time and are payable for a specific period of time
- Term life insurance premiums generally increase at each renewal
3. Cash Value
Guaranteed Cash Values:
-Term life insurance does not accumulate cash values
-Permanent life insurance accumulates guaranteed cash values
-The growth in cash values is tax-deferred under current federal income tax law
-You may borrow against the cash value as a policy loan at the current policy loan interest rate -Borrowed amounts reduce the death benefit and cash surrender value
-Amounts withdrawn that exceed the cost basis of the policy are federally income taxable
Dividends:
-Term life insurance does not earn dividends
-Permanent life insurance policies may be eligible for dividends
-Dividends are a return of premium and are based on actual mortality, expense, and investment experience of the company
-Dividends are not guaranteed, since actual experience is not known in advance
4. Duration of Coverage
Note: A combination of term life insurance and permanent life insurance is often appropriate.
People often get a life insurance policy to ensure that their loved ones will be taken care of in case of a untimely death. A life insurance company generally offers two types of insurance policies: Term Life Insurance and Permanent Life Insurance.
Term Life Insurance
Term Life Insurance provides death protection for a stated time period, or term.
- Good choice for short-range goals
- Provides temporary life insurance protection on a limited budget
- Premiums increase when the policy is renewed
- Can be converted to a permanent policy at any time prior to age 75 (subject to established minimums)
Permanent Life Insurance
Permanent life insurance provides death protection for as long as you live.
- Good choice for long-range goals
- Guaranteed cash values can provide money later on to help with temporary needs or emergencies- Level premiums
When deciding which type of life insurance would best meet your need, four basic features should be considered:
1. Death Benefit
- Term life insurance provides a death benefit for a stated period of time
- Permanent life insurance provides a death benefit for as long as you live
2. Premium
- Permanent life insurance premiums are generally level and payable for life
- Term life insurance premiums will increase over time and are payable for a specific period of time
- Term life insurance premiums generally increase at each renewal
3. Cash Value
Guaranteed Cash Values:
-Term life insurance does not accumulate cash values
-Permanent life insurance accumulates guaranteed cash values
-The growth in cash values is tax-deferred under current federal income tax law
-You may borrow against the cash value as a policy loan at the current policy loan interest rate -Borrowed amounts reduce the death benefit and cash surrender value
-Amounts withdrawn that exceed the cost basis of the policy are federally income taxable
Dividends:
-Term life insurance does not earn dividends
-Permanent life insurance policies may be eligible for dividends
-Dividends are a return of premium and are based on actual mortality, expense, and investment experience of the company
-Dividends are not guaranteed, since actual experience is not known in advance
4. Duration of Coverage
Note: A combination of term life insurance and permanent life insurance is often appropriate.
