Types of Life Insurance

Coverage based on your unique needs

We strive to help make it easier for you to understand life insurance policies. Don't hesitate to talk to an advisor to help determine what best meets your needs. The most common types of life insurance fall under two major categories:

Term life insurance

Term life insurance provides coverage for defined periods of time.

Permanent life insurance

Permanent life insurance provides coverage that in most cases does not expire. Common policy types are whole life, universal life and variable universal life insurance.

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Term life insurance

Coverage for a defined period of time

Consider term life insurance if you have a temporary need for coverage, a limited budget or a particular business application for it.

Limited time period. The main purpose of term life is to pay out proceeds (referred to as a “death benefit”) if the insured individual dies during a set period of coverage – typically 10 years or more. You receive no benefits after the policy expires.

Cost-effective. Compared to other types of life insurance, term life tends to be the least expensive coverage.

Return of premium (ROP). ROP term life insurance is a specialized type of term life. With this type of policy, at the end of a guaranteed period, you can receive a refund of all the premiums you have paid.

Permanent life insurance

Whole life insurance

Purchase whole life insurance when you want a permanent “death benefit” and a “cash value”. The permanent death benefit does not expire and it's the fund paid out on a life insurance policy when the insured person dies. The cash value is an amount of cash available to you for loans or withdrawals that builds up over time in your policy. Keep in mind that loans and withdrawals may reduce the death benefit.

Universal life insurance

Consider universal life insurance for flexibility in the value of the proceeds (the death benefit) paid out on the policy. Like whole life insurance, you receive a permanent death benefit when the insured dies. Universal life offers you a choice between a policy with just a death benefit or one with both a death benefit and the ability to accumulate cash value. You accumulate cash value based on an interest rate determined by the insurance company.

Variable universal life insurance

Consider variable universal life insurance, another type of permanent life insurance, when you want to invest the cash value of your policy in stock and bond market portfolios. Like whole life insurance, you receive a death benefit if the insured dies at any age. By investing in the markets, you have the opportunity to accumulate a higher cash value than you might with whole life or universal life insurance. Work with a financial advisor to determine your investing time horizon, risk tolerance and whether investing your cash value in stocks in bonds makes sense for you.

Life insurance riders

Many life insurance policies can include riders which are add-ons of extra features and benefits to the baseline coverage. One example of this is a long-term care rider.

Long-term care riders on life insurance

A major cost for most Americans over age 65 is specialized care, such as a nursing home, assisted living or in-home care. Most people don’t properly plan for long-term care expenses. A wealth management professional can help you plan to protect your assets and potentially relieve the pressure on family members to act as caregivers.

One cost-effective way to purchase long-term care insurance is to add a rider to a permanent life insurance policy. The long-term care rider typically pays you benefits when you are not able to perform two out of the six basic Activities of Daily Living (ADLs): eating, bathing, getting dressed, toileting, transferring, and continence.

Talk to an advisor to determine if adding a long-term care rider to a life insurance policy makes sense for your situation.