Types of life insurance

Term Life Insurance:
Term insurance is life insurance coverage for a specified period of time. This can be at a guaranteed rate or in some cases a guaranteed rate for a period of time and then a projected rate. Term life insurance periods can be for 1 year, 5 years, 10 years, 15, 20 and even 30 years. For example: 30 year level term life insurance would guarantee a level premium for 30 years based on a specified death benefit. Term life insurance is usually the least expensive form of life coverage, at least initially. After the initial term period of years, 5,10,15, 20, 30 etc. the policy could terminate or it can renew at a higher premium. If you are allowed to renew it at a higher premium (based on your then attained age), it is called renewable term life insurance.

Whole Life Insurance:
Life insurance which has a guaranteed level premium for the rest of one’s life with no increases in life insurance premium, with a guaranteed cash value. There is participating whole life insurance usually issued by a mutual life insurance company where one participates as an owner of the insurance company and there is non-participating whole life insurance issued by a stock life insurance company.

Universal Life Insurance:
Universal life insurance is permanent life insurance with premiums that are not guaranteed. To a certain degree one can “design” a premium on this type of policy. Universal life insurance often can be set up with a lower premium initially than whole life insurance. Premiums and values are based on projections of assumed interest rates, the cost of insurance (also known as mortality cost) and the insurance company’s expenses. The actual premium paid may increase because interest rates may go lower or the projected cost of insurance may increase.

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