Types Of Life Insurance

Life Insurance Basics

When looking for Life Insurance, it can be confusing due to the many different carriers and products that are available.  Each product serves a specific purpose to solve a particular problem.  Basically there are 3 types of Life Insurance;  1) There is Term Life Insurance; 2) There is Whole Life Insurance; and 3) There is Universal Life Insurance.  Below I will go over the fundamentals of each to help give you a better understanding of what each is and what each type is used for.

Term Life Insurance

Term Life Insurance is your most simplest form of Life Insurance and is based on a specific term for either 1 year, 10 years, 15 years, 20 years, 25 years or 30 years of coverage.  It is usually used to cover an asset that is financed for a specific period of time or it can be used to provide coverage for a specified period of time of an individual's life, at a very low price. You will find this to be the most cost effective coverage and the lower the term, the lower the price.

The downside to Term Life Insurance, is that once the coverage has expired, there is no cash value  (unless you have term life insurance with a cash-back option) and there no more coverage,  If there is still a need for Life Insurance, the individual will have to obtain a new policy based on their current age and risk class at that time the new coverage is sought.

Whole Life Insurance

Whole Life Insurance is a great option in that it provides permanent coverage, usually until age 110 or 121 years of age.  Whole Life also builds cash value that can be borrower from tax -free.  The cash values are usually guaranteed, but accumulate slower than you will find with Universal Life Insurance.  Whole Life Insurance is a great option for folks in their later years in life as this type of insurance will generally accept a person with medical issues and on medications that are usually not accepted by Term Life Insurance.

The downside to Whole Life Insurance is the price as compared to both Term Life Insurance or Universal Life Insurance.

Universal Life Insurance

Universal Life Insurance is basically a hybrid between Term Life Insurance and Whole Life Insurance.  Indexed Universal Life Insurance (IUL) is great for either providing Tax-Free Retirement either as a stand alone or as a supplemental Tax-Free Retirement option for folks, when structured properly.  Your cash accumulation is based on the growth of the S&P 500, or another index, but guaranteed not to lose money.

The benefits of using high cash value Life Insurance, like Indexed Universal Life (IUL) over a 401K or a traditional IRA is that the money is take out Tax-Free and does not count against your AGI (adjusted gross income) when it comes to social security benefits.  Receiving money Tax-Free provides comfort to people as the future tax rates are unknown.  Generally when people are in their retirement years, they have less tax write-offs and less tax deductions, so deferring taxes is generally not a good idea.


Contact Family First Life to discuss what Life Insurance Option may be best suited for you.