Life Insurance

Term Life Insurance

Term life insurance provides coverage for a specific period of time, usually from one to 30 years. Term policies provide a death benefit only if the insured dies during the term. This can be at a guaranteed rate or in some cases a guaranteed rate for a period of time and then a projected rate. For example: 30 year level term 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.

Return of Premium (ROP) Life Insurance

Also known as return of premium term life insurance, this is term life insurance for a period of time where one receives a guaranteed return of premiums paid if you keep the policy for the term period. For example, David Sharpe of Los Angeles is forking out $11,240 a year in premiums for term life insurance, but he isn't concerned about the payments. He's counting on getting all of them back after the policy expires in 30 years, assuming he's still alive--a total of $337,200 tax free. At 34, the personal agent and manager says, "It is my intention to live well beyond the 30 years that my insurance covers." Most of these policies also give a partial return of premium if you keep the policy for a great part of the years.

Universal Life Insurance

A flexible premium Life Insurance Policy under which the policyholder may change the death benefit from time to time (with satisfactory evidence of insurability for increases) and vary the amount or timing of premium payments. Universal life insurance is a permanent policy (covers you for your entire life) that gives the owner the rights to vary premium payments and the death benefit within certain prescribed limits. This type of policy also includes an accumulation account whose rate of return fluctuates according to investment performance but will not fall below a guaranteed minimum rate of return, such as two or three percent. The actual premium paid may increase because interest rates may go lower or the projected cost of insurance may increase.

Whole Life Insurance

Life insurance, which has a guaranteed level premium for the rest of one’s life with no increases in 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 company and there is non-participating whole life insurance issued by a stock life insurance company.

These explanations are not meant to provide complete details of how different types of policies work. Complete details are contained in each company's policy.