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TERM LIFE INSURANCE: Term life insurance offers protection for a stipulated period of time. The policy may be renewable annually, or it may be issued for a fixed period of 5 to 30 years. The death benefit is payable only if death occurs within the period that the insurance is in force.
The major advantage of term insurance is it is inexpensive in the early years.
The disadvantage of term insurance is ultimately will either expire or become to expensive to renew.
WHOLE LIFE INSURANCE: Unlike term insurance which is intended to provide protection for a specified period, the purpose of "whole life" insurance is to provide protection for the duration of an individuals life. It is called permanent insurance because the amount of insurance coverage and the premium charged remain constant for the life of the insured. In addition to providing death benefits, whole life policies contain a savings feature called cash value. The idea behind cash value is to provide the insured with some type of tangible benefit while they are alive. The benefit is in the form of a savings program which generally carries a guaranteed minimum level of interest return typically 4 to 4.5%.
The major advantage of whole life insurance is, the premiums are guaranteed to never change, the policy has a built-in savings feature and many policies will have an increasing death benefit or even become self-supporting allowing the payer to stop paying premiums.
The disadvantage to whole life insurance is the premiums are higher.
UNIVERSAL LIFE INSURANCE: This program is similar to whole life insurance in that it provides both death protection and a cash value savings feature, typically the guarnateed interest rate is 4% or 4.5%. Unlike term or whole life insurance, this program is flexible, the policy can be modified by the policy, owner increasing or decreasing both the death benefit and/or premiums paid.
The advantage to this program is policy flexibility. Being able to change the program is a very advantageous feature. As an individuals insurance needs change, this policy can be changed to meet those needs.
The disadvantage of this program is also flexibility. policy owners can abuse this policy by withdrawing cash or decreasing premiums for extended periods of time.
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