Term Assurance provides Life insurance coverage for a specified term. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else.
Level Premium Term can usually be purchased in 5, 10, 15, 20, 25, 30 or 35 year terms. The premium and death benefit stays level during these terms.
Permanent Life Insurance is Life insurance that cannot be cancelled for any reason except fraud, so long as the owner regularly pays his premiums. Any such cancellation must occur within a period of time (usually two years) defined by law. A Permanent insurance policy accumulates a cash value up to its date of maturation, reducing the risk to which the insurance company is exposed as well as the policy's expense to the company. Such policies will be more expensive to older people than to younger ones. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.
Whole Life Insurance provides lifetime death benefit coverage for a level premium. For younger persons, Whole Life premiums are higher than Term insurance premiums, but because Term insurance premiums rise with increasing age of the insured, the cumulative value of all premiums paid under Whole and Term policies are roughly equal if policies are maintained to average life expectancy. Part of the insurance contract stipulates that the policyholder is entitled to a cash value reserve that is part of the policy and guaranteed by the company. This cash value can be accessed at any time through policy loans that are received income tax-free and paid back according to mutually agreed-upon schedules. These policy loans are available until the insured's death. If any loans amounts have not yet been paid upon the insured's death, the insurer subtracts those amounts from the policy's face value/death benefit and pays the remainder to the policy's beneficiary.
The advantages of Whole Life insurance are its guaranteed death benefits; guaranteed cash values; fixed, predictable premiums; and mortality and expense charges that do not reduce the policy's cash value. The disadvantages of Whole Life are the inflexibility of its premiums and the fact that the internal rate of return of the policy may not be competitive with other savings and investment alternatives.
Death benefit amounts of Whole Life policies can also be increased through accumulation and/or reinvestment of policy dividends, though these dividends are not guaranteed and may be higher or lower than earnings at existing interest rates over time. The internal rate of return and dividend payment realized by the policyholder is often a function of when the policyholder buys the policy and how long that policy remains in force.
Universal Life Insurance (UL), introduced in the 1980s is intended to combine Permanent insurance coverage with greater flexibility in premium payments, along with the potential for greater growth of cash values.
Universal Life insurance policies can have cash values. Paid-in premiums increase their cash values; administrative and other costs reduce their cash values.
UL addresses the perceived disadvantages of Whole Life – namely that premiums and death benefits are fixed. With Universal Life, both the premiums and death benefit are flexible. With the exception of guaranteed-death-benefit UL policies, they trade their greater flexibility off for fewer guarantees.
Limited-pay Life insurance is another type of Permanent Life insurance. Premiums are paid over a specified period, commonly ten or twenty years, after which no additional premiums are due. Benefits are sometimes paid out at the age of 65; other ages can include 75, 85 and 100.
Foremost Insurance Group
Patriot Insurance Company
Philadelphia Insurance Companies