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Life Insurance

The following is basic information on the most common types of life insurance products.  Contact Consumer Affairs directly for more information on your specific type of life insurance policy or annuity.

Term Life

Term Life insurance is a type of life insurance that guarantees payment of the policy coverage limit (i.e. stated death benefit) if the covered person dies during the term period specified on the policy.  Once the term expires, the policyholder can either renew it for another term, convert the policy to a different policy with permanent coverage, or allow the term life insurance policy to terminate.

Whole Life

Whole Life insurance provides coverage for the life of the insured.  In addition to paying the policy coverage limit (i.e. death benefit), whole life insurance may also include cash value accumulation within the policy benefits.  Once cash value starts to accumulate, you may be able to use these funds in the following ways:

  • pay your policy premium
  • take out a loan at a lower rate than the banks offer
  • create an investment portfolio that maintains and accumulates wealth
  • supplement retirement income

 These policies are also known as “permanent” or “traditional” life insurance.

Universal Life

Universal life (UL) insurance is permanent life insurance with an investment savings element and low premiums that are similar to those of term life insurance.  Most UL insurance policies contain a flexible-premium option.  This allows more than the required amount of premium to be paid.  If there is enough money in the account, future payments may be skipped.  Some UL policies require a single premium (one lump-sum premium payment) and others allow fixed premiums to be paid (the same premium amount paid each year).

Annuities

An annuity is an insurance product in which one lump-sum payment or a series of payments are invested and, in return, money is received as income from the annuity on a regular schedule, beginning either immediately or at some point in the future.

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