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3750 West Deerfield Road - Riverwoods, Illinois 60015. Phone: (800) 233-3750
A life insurance policy is a legal contract between a policy owner and an insurance company. In it, the owner agrees to make payments (known as premiums) to the insurance company in return for payment by the insurance company of a death benefit to a party (the beneficiary) if another party (the insured) dies while the policy is in effect. The owner and the insured are usually the same person. If they are not, the owner and beneficiary must have an insurable interest in the insured's life.
There are several types of life insurance policies:
|Insurance Type||Premiums||Cash Value||Lifetime Coverage?||Best For...|
|Term||Usually lowest||No||No - some policies can be renewed, but at higher costs.||People who only need insurance for a limited time|
|Whole||Usually higher than term in early years, but lower than term in later years of the policy||Yes||Yes||People who want guaranteed lifetime insurance|
|Universal||Premiums could be higher or lower than whole-life depending on how much is desired in cash value||Yes||Yes||People who want lifetime insurance, but with added flexibility|
Term life insurance will insure you for a specified period, usually from one to thirty years. If the insured dies within the stated term, the insurance company pays the death benefit to the beneficiary. When the term ends, the insurance usually ends although some term life insurance policies may have a renewal or conversion privilege that may extend coverage at a higher cost. The premiums for term life insurance policies are usually the lowest among the different types of life insurance, but will increase with the age of the insured. There is generally no cash value in a term life policy. The death benefit is generally not subject to Federal income taxation.
Permanent life insurance can insure you for your entire lifetime. When the insured dies, the insurance company pays the death benefit to the beneficiary. Permanent life insurance policies can build cash value that you can borrow against to help meet future needs. You generally pay no Federal income taxes on any earnings of the policy as long as the policy remains in force. The death benefit is generally not subject to Federal income taxation.