Whether you just want a simple plan to cover funeral expenses or a multi-dimensional financial security program to cover your family and business, the versatility of life insurance can meet your needs with a wide array of features and characteristics. Various product types offer different cost structures, cash value accumulation and the ability to cover many different people on the same contract. Awareness your options helps you make the appropriate choice.
There are three main types of products available: Term life, whole life and universal life.
Term insurance is typically the most simple, with low-cost guaranteed premiums and coverage lasting for a specified term up to age 65. Short-term coverage is generally guaranteed renewable at a higher premium that remains level for the term.
Whole life insurance offers permanent insurance at a higher premium that provides added benefits such as a cash surrender value, premiums vanishing after a certain predetermined period, and increasing death benefits.
Universal life is a combination of low-cost insurance with a side investment funded by your additional premiums. You control the investment decisions.
Most insurance plans allow you to insure more than one life on the same contract. In addition to a single-life contract, through which you insure only one person, you may purchase a multi-life contract to insure two or more people. The advantage of this method is that you can save on fees as well as manage the payment of premiums on a number of insurance coverages through a single contract. Joint policies are also commonly available, where two people are insured and the death benefit is triggered when the first insured dies (first-to-die) or on the death of the last insured (last-to-die). A typical use of a joint last-to-die contract would be by a husband and wife who wish to pay taxes due upon the death of the last person to die.
Riders are additional coverages included on your basic life coverage. Riders can take the form of additional life insurance, such as an extra term policy on your whole life coverage. They may also take the form of supplemental benefits, such as waiver of premium: The premium is paid by the insurance company in the event of your disability.
Rights and Privileges
Term insurance generally comes with a conversion option, allowing you to change all or part of your coverage to a permanent policy without requiring evidence of health, provided you are under a certain age, usually 65. Whole life and universal life come with withdrawal and policy loan options that allow you to take advantage of the accumulated cash values without canceling the contract.
Philippe Lanctot started writing for business trade publications in 1990. He has contributed copy for the "Canadian Insurance Journal" and has been the co-author of text for life insurance company marketing guides. He holds a Bachelor of Science in mathematics from the University of Montreal with a minor in English.