What is life insurance?
Life insurance pays out a sum of money either on the death of the insured person or after a set period of time.
It is not complicated or expensive when you work with a licensed representative who starts from the obligation you are protecting — a mortgage, a child’s education, a business partner’s buyout — rather than from a product they would like to sell.
Common types of life insurance
Term life
Coverage at a fixed rate of payments for a limited period — the term. After that period expires, coverage at the previous premium is no longer guaranteed. If the insured dies during the term, the death benefit is paid to the beneficiary. Term is the least expensive way to buy a substantial death benefit per premium dollar over a specific period.
Whole life
A policy that remains in force for the insured’s whole life and, in most cases, requires premiums to be paid every year into the policy. Predictable, permanent and correspondingly more expensive than term.
Universal life
A form of permanent life insurance where premium paid above the current cost of insurance is credited to the policy’s cash value. Cash value is credited monthly with interest and debited monthly for the cost of insurance and other charges — even in months when no premium is paid. Interest is set by the insurer with a contractual minimum. When the earnings rate is pegged to a financial index, the contract is an Equity Indexed Universal Life policy.
Variable universal life
A policy that builds cash value which can be invested across a range of separate accounts similar to mutual funds, with the choice of accounts left to the contract owner. “Variable” refers to those account values varying with the stock and bond markets; “universal” refers to the owner’s flexibility in making premium payments, from nothing in a given month up to the maximums defined by the Internal Revenue Code.
The two questions worth answering first
How long does the money need to last, and who has to be able to write a cheque without it? Answer those honestly and the product choice narrows to one or two options almost immediately.
We also review beneficiaries on policies you already own. It is the single most common piece of housekeeping people miss after a marriage, a divorce or a death in the family — and it overrides whatever your will says.
Talk to us about the right life insurance for you.