TERM LIFE INSURANCE
Provides “pure insurance” for a period of time to cover certain needs, such as loans, mortgages, education, etc.. It does not have any cash equity. It’s designed to last for a certain period of time. Essentially there are two types of plans - level premium plans where the premium stays level for either 5,10,15,20 or 30 years, and annually increasing premium policies ( also called annual renewable term or ART) The ART policies are typically cheaper for the first two-five years, but then become more costly than a level premium policy. The level premium policies are very cost effective for their initial guarantee period, but then become prohibitive in cost thereafter. The level premium plans have seen a major price war in the last 18 months.
UNIVERSAL LIFE INSURANCE
A flexible premium, interest sensitive, permanent life insurance policy under which the policyholder may change the death benefit from time to time (with satisfactory evidence of insurability for increases) and vary the amount or timing of premium payments. Premiums, less expense charges, are credited to the policy account from which mortality charges are deducted and to which interest is credited at varying rates - currently between 5% and 7%.
SURVIVOR INSURANCE (aka SECOND TO DIE)
This covers two lives - usually a husband and wife - and is designed to provide funds for future estate taxes. If a married couple has an estate of at least $1,200,000 (or project that their estate will be that size by the time both are deceased) then the Federal Estate Taxes can exceed 55% of the gross value of the estate. The Estate taxes are due and payable in 9 months. This type of coverage is not that expensive and can cover that future tax liability so that the estate can be passed in its entirety to the heirs.
BUSINESS INSURANCE
Insures against loss of a Key Executive or Business Partner. Can also be used to purchase the business interest of a partner or shareholder. If you are a business purchasing life insurance for keyman needs, then the cash equity can help a future stock buy back.
