What do the policy types mean and which one is right for me?
Life insurance is broken into two major categories, term and whole life.
Term Life
Term life insurance is simple coverage that offers a straightforward payout and expires after a set period of time (or term) such as 15, 20 or 30 years. Term life insurance is the most affordable option and often provides you the flexibility to convert to a more permanent option (whole life) when the time is right. There are many reasons why you would get a term life insurance policy, read more on that above in our “life insurance 101” section.
You will see different insurance companies brand their products with proprietary names such as level, vantage or protection term policy. This is then followed by the number of policy years you are quoting. Depending on the carrier, each company names their policies differently.
We only work with top rated carriers, however, you can see the insurance company’s credit rating (which indicates their financial strength and stability) right alongside the coverage amount and term length.
Term policies could come with rider options as well-
A rider is an additional life insurance benefit that generally requires additional premium. The addition of riders allows your policy to be customized to your specific needs.
Common term life riders are:
Waiver of Premium Rider
which provides an additional layer of protection that waives your policy’s premium if you become totally disabled (as defined in the rider) so your policy will not lapse.
Accelerated Death Benefit Rider
(which often is included at no additional cost). This protects you if you become terminally ill by allowing you to receive an advance of the policy’s death benefit.
After you apply and submit your application, feel free to contact one of Surevested’s experts to discuss rider options or let us know you are interested in adding one.
When it comes to permanent life insurance policy options, there is a bit more complexity because they can offer benefits far beyond a simple payout.
Whole Life
Whole life policies are the most stable with guaranteed cash value amounts and fixed premiums. These policies will last, you guessed it, for your whole life. As long as premiums are paid, your beneficiary will receive the death benefit amount upon your passing. In terms of the savings portion of this policy, the company you choose will take a portion of your premium payments and put them into an invesment or high interest account. These accumulated funds are called cash value and over time they accrue on a tax-deferred basis.
When comparing permanent life insurance options you will see policies such as
Whole Life, Universal life (UL), or Indexed Universal Life (IUL and IUL2).
Whole and universal life policies are typically made up of two components: an insurance portion and an
investment/savings portion, so you will find information within the quote pertaining to both.
The cash value of your whole life policy gives you the option to borrow against it, like a loan, in case you need funds in an emergency. Also, if you choose to surrender your policy for whatever reason, you will receive your accumulated cash value back less any surrender charges.
On some whole life policies, you could also be offered something called a dividend. This is the portion of the insurance company’s profits that are paid to the policy holder, generally on a yearly basis. This is common among mutual insurance companies rather than publicly traded insurance companies. When you’re on the quote page, if the policy you are quoting offers a dividend, you can see it’s historical rate of return.
Universal life or Indexed Universal Life are a bit more complex because they combine some of the features of both term and whole life and their options are variable and adjustable.
Universal Life (UL)
Universal Life (UL) gives you the option to increase or decrease your death benefit over time and pay premiums on a less predictable basis. This means you can change how much coverage you have if your needs change. Additionally, Universal life policies can allow you to pay premiums over time using the money that has accumulated in your cash value. In a nutshell, UL policies offer some of the guarantees of a whole life policy with the flexibility of coverage change.
Indexed Universal Life (IUL)
An Indexed Universal Life (IUL) policy offers the same benefits as a UL policy except your cash value is tied to various well known indexes such as the S&P500 (not to be confused with investing money directly into the stock market). These policies are a bit riskier as interest based performance is not guaranteed.
Although many companies offer the same types of policies, each company names their policies differently. We only work with top rated carriers and you can see the insurance company’s credit rating (which indicates their financial strength and stability) right alongside the coverage amount and term length in all the quotes we provide.
In order to better understand the savings portion of whole, UL and IUL life policies, you will be able to compare on the quote page how the savings portion of these policies performs compared to other investments like a savings account, a treasury bond and more.
If you click on the advanced analytics portion of the quote you can see graphs on the carriers risk and volatility compared to the market, the risk adjusted return and how your premium contributions would compare on a term vs. whole life option.
All life insurance quotes come in a full illustration form. These documents are comprehensive overviews of the policy values broken down year to year, possible rider options and information regarding it’s possible performance. If you are interested in your quote’s illustration, simply click on the “View Illustration” button. This can be downloaded and printed if you would like to review it more thoroughly.
