Life insurance is a policy or contract between you and a life insurance company that can last for the rest of your life or for a specific time period. This contract guarantees that your beneficiaries will get a tax-free cash payment (also called the death benefit) when you die. The exact amount they’ll get depends on how much insurance you purchase and the type of policy you select. It’s important to note that the death benefit is guaranteed only if you pay the required premiums and meet all the policy requirements.
Term life insurance
It’s temporary coverage that can last 10, 15, 20 or more years. It’s initially a cheaper option. But your premiums typically rise if you decide to renew your policy at the end of your term.
Some term plans let you convert to permanent life insurance. Permanent insurance is more expensive than term, but most plans offer premiums that remain the same for the rest of your life.
Permanent life insurance
It’s insurance coverage that lasts forever and never expires. There are three types of permanent life insurance: whole life, participating, and universal life.
Some plans may also offer tax-preferred growth in your cash value and ways to increase the death benefit.
What are the different types of permanent life insurance?
There are 3 types of permanent life insurance plans: whole life insurance, universal life insurance and participating life insurance.
Each plan comes with unique features to meet your specific needs. Here they are at a glance:
Whole life insurance
- Lifelong coverage
- Tax-free death benefit
- Chance to grow cash value
Universal life insurance
- Lifelong coverage
- Tax-free death benefit
- Chance to grow cash value
- Option to grow savings on a tax-preferred basis
- Choice of investment account options
Participating life insurance
- Lifelong coverage
- Tax-free death benefit
- Chance to grow cash value
- Option to grow savings on a tax-preferred basis
- Opportunity to earn policy dividends
