Some Types of Life Insurance
1. Term Insurance is the most basic, and generally least expensive, form of life insurance for people under age 50. A term policy is written for a specific period of time. Usually 10, 20 or 30 years. A level term policy locks in the annual premium and death benefit.
2. Whole Life combines permanent protection with a savings component. As long as you continue to pay the premiums, you are able to lock in coverage at a level premium rate. Part of that premium accrues as cash value. As the policy gains value, you may be able to borrow up to 90% of your policy's cash value tax-free
3. Universal Life is similar to whole life with the added benefit of potentially higher earnings on the savings component. Universal life policies are also highly flexible in regard to premiums and face value. Premiums can be increased, decreased or deferred, and cash values can be withdrawn. You may also have the option to change face values. Universal life policies typically offer a guaranteed return on cash value, usually at least 4%. You'll receive an annual statement that details cash value, total protection, earnings, and fees.
4. Survivorship life Insurance (also referred to as last-to-die or second-to-die) is a unique type of contract that insures the lives of two people. It pays a death benefit upon the death of the second insured. Therefore, it is typically less expensive than two individual policies. Survivorship life is often used for estate planning, where it may be possible to potentially leverage today's dollars -- via insurance premiums -- into a potentially significant death benefit that can be used to fund estate taxes, create wealth for future generations, or benefit a charity. These policies may be available if one insured is medically "uninsurable."
5. First-to-die life Insurance insures the life of at least two people and pays a benefit upon the death of the first insured. This policy is useful for covering a mortgage or other large debt obligation where there is more than one debtor. In addition, it can be an ideal tool for funding a buy-sell agreement within a closely held business.