Individual Life Insurance

The three core product types are:

• Term life
• Universal life
• Whole life

A variation on these core concepts exist. They all are good products they are just best used to accomplish different objectives.

Term life is ideally suited for short term needs as you can lock in the lowest rate today for the length of the term. Popular products are 10 and 20 year term.  These products are ideal when you  want the most coverage possible today at the lowest price.  The insurer promises to pay the face amount on death in exchange for the set premium during the term.

The downside of Term Insurance is it renews at a significantly higher rate and or cancels at the end of the term. Some folks can be priced out of their insurance in the future and or their health changes and you become uninsurable during the term.

Universal life is ideal for people that want some flexibility in the payment of premiums. It offers the ability to potentially build internal policy equity which is invested inside the policy to be used to pay premiums, withdrawn as cash, borrowed against and or leveraged as collateral. At one time universal life was marketed as flexible life. You can use some of the flexibility provided by your internal fund value to help accomplish some of life’s objectives. The customer has flexibility in the premiums terms and can choose annual renewable term, term to 100 cost base and or paid up terms like 20 year paid up options.

You can also pay extra within government rules or take premium holidays as long as you have internal funds values. Someone that does not want the cost of insurance to increase can benefit over time from the fixed premium rate.

The downside to universal life is you are generally paying more in early years when compared to term insurance. The various options on investments, premium periods, bonuses and death benefits can be confusing to some people and it is important that you understand your product. These could also be considered as positive though. Universal life generally has high cash surrender charges in early years on fund values and for this reason it should be a long term purchase decision.

Whole life is ideally suited for long term insurance needs. A level premium is set and the beginning of the policy and does not increase over time.  Policies can be participating or not. Participating policies benefit when the insurer is profitable and additional dividends are credited to the policy values. The insurer invests the additional fund values and your equity performance is dependent on their performance. You do not have the investment decisions like a universal life policy. Dividends can be used to purchase additional paid up insurance also known as paid up additions. In the future you can use dividends to pay the premium and keep the insurance in force.  This is called premium offset  You can withdraw, borrow and or cash in a policy to access the equity of a whole life policy. Dividends can also be paid in cash.  This is the premium product for long term insurance coverage without rising premiums.

Whole life is costly initially when compared to term insurance and it can be unaffordable for many people to be properly insured relative to their need. Dividends and Cash values can be small to non existent in early years and this product should not be purchased for short term needs.  Many people start to think of these policies as investments due to the equity build up but they should be considered an insurance policy first with features. It should not be used as a first line investment fund it is insurance and treated as such.

Everyone is different, has different objectives and needs. What is best for you is dependent on your objectives.  You can have one type and or a combination of the types. The solution to your needs is probably evolving overtime anyways and perhaps that is why the word life is here, it is for your life and the ones you love.

To contact us, give us a call or email us.

With whole life insurance you do get Guaranteed premiums with a basic coverage plan while term life insurance generally includes premiums for an initial period. Universal life insurance varies.

While term and universal life insurance may or may not have a guaranteed cash value, whole life does and may also have additional non-guaranteed cash values related to dividends.

• Term Life – Yes, for a period of time.
• Universal Life – Yes, if the required charges are paid for the duration of the coverage, there will be guaranteed death benefits.
• Whole Life – None

• Term life – No
• Universal life – Yes, there is a variety of guaranteed, fixed-income, index-linked and mutual fund-linked interest options from which to choose from
• Whole life – No, but while the company’s investment division manages the participating account assets, you get the choice to do what you want with the dividends.