Life Insurance
I don’t call it "Life Insurance," I call it "Love Insurance." We buy it because we want to leave a legacy for those we love. - Farshad Asl
Whole life (Permanent)
Whole life or permanent insurance pays a death benefit whenever you die—whether it’s tomorrow or age 100. There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type.
With traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So the insurance company keeps the premium level by charging a premium that, in the early years, is higher than what’s needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.
Permanent life insurance also in many cases, has a “cash value” component which can be borrowed against, or in the case where the policy is cancelled, it can be “cashed out” and returned to the policyholder.
Term Life
Term Insurance is the simplest and usually the least expensive form of life insurance. It pays only if the insured dies during the term of the policy, which is usually from one to no more than 30 years.
There are two basic types of term life insurance policies: decreasing term and level term.
Level term means that the death benefit stays the same throughout the duration of the policy.
Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy’s term.
Sarah’s Story
In May 2014, Sarah W.’s world changed forever with the sudden, unexpected death of her husband, an event that devastated Sarah and her eight-year-old son, Shea, and one that left them in an uncertain financial position. But shortly after his death, Sarah discovered the extent to which Barney had prepared for the worst day of their lives — he had purchased life insurance. The insurance policies her husband had taken out allowed her the freedom to leave her job, devote her full attention to her son, and begin a new journey on a path to healing, together. Sarah W.’s story is just one of hundreds.