Life Insurance FAQs

Should I buy term life or permanent life insurance?

The type of life insurance you need is dependent upon your particular needs. Term life insurance is appropriate and more cost effective for temporary needs which may be a period of one to thirty years. On the other hand permanent life insurance is better for permanent or long term needs. In some cases, a mix of both term life and permanent life insurance may be suitable.

What is the difference between whole life and universal life insurance?

Whole life insurance and universal life insurance are both types of permanent life insurance; however, universal life has flexible premiums and an adjustable death benefit. Whole life insurance premiums are fixed level and the death benefit is not adjustable. Another difference between these two types of insurance is the cash value of a universal life insurance policy is interest sensitive. If interest rates go up, so will the cash values. A whole life insurance policy's cash value is not very interest sensitive.

What is the advantage of level term life insurance vs. yearly renewable term life insurance?

The advantage of level term life insurance is that the premiums remain level over a specified period of time. Yearly renewable term life insurance has a lower initial premium; however, the premium rises each year. Yearly renewable term life insurance is only cost effective for a few years because of the rising premiums. If you need term insurance protection for more than a few years, then a level term life insurance policy can cost less. 

Please carefully consider the length of the level premium period that will suit your needs. For example, if the primary purpose of the death benefit is to provide income to  support very young children and/or to fund college education expenses, a 20-year level premium might be appropriate. If these children are already in their young teens, you may need only a 10-year level premium (longer level premium policies are more expensive). 

After the level premium period expires, most policies require you to re-qualify with medical underwriting in order to receive a favorable premium. If you do not or cannot re-qualify, the premium typically rises dramatically after the expiration of the level premium period.

What riders/options/features are available on life insurance policies?

The following riders/options/features are available with some life insurance policies:

Conversion Feature – allows the owner of a term life insurance policy to exchange (or convert) the policy to a permanent life insurance plan (whole life or universal life) without evidence of insurability.

Spousal Discount – if both a husband and a wife or two business partners purchase life insurance at the same time, then a discount will be deducted each year from the total cost of both policies.

Children’s Insurance Option – provides term life insurance coverage on each child of the insured’s family.

Accelerated Death Benefit - accelerates the availability of a portion of the death benefit if the insured is diagnosed as terminally ill by a licensed physician (must be terminal within 12 months).

Waiver of Premium Option - the insurance company will continue to make your life insurance premium payments if you become disabled.

Accidental Death Benefit Option – an additional death benefit will be paid if you die by accidental means.

Guaranteed Purchase Option - guarantees that you may purchase additional life insurance in the future without proof of insurability