Frequently Asked Questions

Permanent life insurance, as its name suggests, is permanent until the end of life. These policies are more expensive than term insurance because the life insurance company is expected to pay the death benefit on a permanent policy.

Both Universal and Whole Life insurance fall under the “Permanent” Life Insurance category. Think of these type of plans as having a tax deferred “cash value” portion and an “insurance” portion.

There are some key differences between the two options, but both do offer death benefits and allow you to borrow against the cash value of the policy (if available). Keep in mind this also makes the premiums for this type of insurance more expensive.

Term life insurance is typically available for a given number of years (or term). This is usually 10, 15, 20, 25, or 30 years. If you pass away during this period, your designated beneficiaries get financial benefits. At the end of the term, the life insurance terminates. Some term policies may have a conversion privilege allowing you to convert to permanent insurance without any proof of your medical condition. Term insurance should be used for life insurance needs that do not exist for the whole of your life. For example, the most important reason anyone should buy life insurance is to take care of their dependent children if they die. This particular need for life insurance is not a lifetime insurance need. Eventually children grow up and become financially independent. No one needs permanent life insurance to address this need. The other reason why people get term insurance is to pay off a large debt such as a home mortgage. After 20-30 years the mortgage is paid down or paid off so there is no longer a need for life insurance to pay off the debt once the debt is gone.

Universal life insurance is sometimes referred to as adjustable life insurance because of the flexibility it offers. You have the ability to make changes to your death benefit or your premiums within the limits of the policy which may require proof of good health if you increase your coverage. The interest rate also adjusts depending on the type of cash value account you choose. You have the potential for higher growth in your cash value, which helps reduce the net cost of insurance. For this reason, universal life typically costs less than whole life insurance. As you get older the internal costs for insurance increase, but the interest you earn from the cash value helps to offset the costs.

Whole Life Insurance has inflexible fixed monthly premiums. This means you pay the same premium each and every year.

These types of policies are typically promoted as guaranteed for your whole life. For a higher premium, you can have a whole life policy paid up in advance, and these have names such as 20 Pay Life, of Whole Life Paid up at age 65. Mortality and expense charges are contractually guaranteed to never change. Whole Life has a set amount of cash value that accumulates and you can use the cash value to borrow against but you must pay a loan interest rate to use it. You can also have an automatic premium loan provision to prevent the policy from lapsing. Mutual life insurance companies declare dividends to its policyholders because they do not have shareholders.

These dividends may be small in the beginning but can become larger as the years go by. For example, they can accumulate as cash, or be used to purchase more insurance called paid up additions.

Whole Life Insurance has inflexible fixed monthly premiums. This means you pay the same premium each and every year.

This types of policies are typically promoted as guaranteed for your whole life. For a higher premium you can have a whole life policy paid up in advance, and these have names such as 20 Pay Life, of Whole Life Paid up at age 65. Mortality and expense charges are contractually guaranteed to never change. Whole Life has a set amount of cash value that accumulates and you can use the cash value to borrow against but you must pay a loan interest rate to use it. You can also have an automatic premium loan provision to prevent the policy from lapsing.

Mutual life insurance companies declare dividends to its policyholders because they do not have shareholders. These dividends may be small in the beginning but can become larger as the years go by. For example, they can accumulate as cash, or be used to purchase more insurance called paid up additions.

Term life insurance is the most affordable type of life insurance. It is a good start if you want to get life insurance and know your family will not be left with a financial burden should you pass away. Some life insurance policies come with riders (or extra benefits), such as the possibility to add accidental death insurance too. The biggest advantage of this insurance is that its price remains stable throughout its term. Term insurance does not have any cash value so the premiums can remain low to pay for a death benefit only. Some term policies now have living benefits to pay a portion of the death benefit PRIOR to death in the event of a terminal, critical or chronic illness.

Many people take their good health for granted. Younger people often find it easy to qualify for preferred health discounts, but as you grow older changes in your health can risk your preferred health status. When you purchase a longer level period policy with a preferred health discount, such as a 30-year term policy, your premium does not change during the 30 years. If you put on weight during the 30-year level term period your premiums will remain unchanged. But if you purchase a cheaper 10-year policy, with the idea of buying another 10-year policy at the end of 10 years, you will pay a higher premium based on your older age, and all health factors including your weight will be reexamined. An adverse change could dramatically affect what you pay for a new policy. Things that you may think are relatively minor can lead to higher premiums for new policies. *We recommend NOT to select a shorter level term period, planning to buy a new policy at a later time.

Surrendering your policy means to cancel your policy, receiving its surrender value. In some cases, if you withdrawal funds early, to get the cash value you may be subjected to surrender fees. Please be aware of these surrender fees, especially in the early years of your policy. We recommend you try and avoid these penalties. Please consider this a long-term investment and know that you will need to pay premiums over many years.