Term life insurance

Think renting, not buying.  Term insurance is just that — insurance for a term, or a specific number of years.  It’s not permanent insurance that provides lifetime coverage for your clients, but it typically meets a temporary need, like protecting the family until the kids are out of school or the mortgage is paid off.

• Generally low initial cost, but becomes less affordable at older ages
• Does not build cash value
• Specified premiums must be paid when due or the policy terminates
• Can be level (same premium each year from 1-20 years) or annual renewable (coverage can be renewed, with generally higher premiums, each year)
• If needs increase in the future, a new policy must be purchased

Permanent life insurance

Many of your clients might think of life insurance as simply term insurance — a temporary way to protect their family from financial hardship.  While term is an important type of life insurance, it’s not the only one. Permanent life insurance, which is designed for long-term goals, can also be a smart addition to many financial plans for clients who want more ways to protect their family, reduce taxes, and grow their money over time.

Permanent life insurance — such as whole life, universal, indexed universal, and variable universal — can help your clients:

• Live more.  Unlike term insurance, permanent life insurance protects your family for your entire life, while adapting throughout your life to provide access to your available cash value when you need it most.
• Keep more.  While 401(k) and IRAs offer tax benefits, they do have income taxes on money you pass along. Permanent life insurance allows you keep more of your money through tax deferred growth by helping to minimize your taxes, and generally offering no income taxes on any money you pass along to help give you more control over your and your family’s financial future.
• Build more.  Permanent life insurance is a smart addition to help build your assets. Unlike term insurance, permanent life insurance does have cash value with the potential to grow over time with tax deferred growth.

There are fees and charges associated with permanent life insurance including but not limited to insurance charges, surrender charges, a front end load and administrative charges.

Whole life insurance

Traditional whole life insurance can be used for clients who have a long-term insurance need and want cash value.

• Guaranteed fixed premiums for as long as the policy stays in force. Premiums must be paid when due or policy terminates, at least in early policy years
• Offers guaranteed minimum cash surrender value and non-guaranteed dividends
• Cash surrender value can be accessed by policy loans and surrender of dividends, generally income-tax-free if structured properly
• Will need to purchase additional policies if needs increase

Universal life insurance

Universal life insurance builds cash value by crediting interest at a rate set by the insurance company.  Universal life also provides substantial flexibility in paying premiums, so your clients can vary timing and amount or payments within broad limits.

• Cash value potentially grows tax-deferred through current interest crediting rate
• Cash surrender value can be accessed by policy loans and withdrawals, generally income-tax-free if properly structured
• Premium payment flexibility
• Coverage flexibility so one policy can meet all needs over a lifetime — can increase coverage (with evidence of insurability) or decrease coverage if needs become less as children become adults
• Unlike whole life, policy is more transparent to client since they can see what the crediting rate is and actual policy charges in the Annual Report

Indexed universal life insurance

This type of insurance allows clients to participate in the market with the potential to build cash value through equity-linked options and full downside protection.  Clients select the index they want to track (such as the S&P 500® Index) and their cash value potentially grows based on the performance of the index, subject to a floor (generally 0%) and a current growth cap.

• Cash value potentially grows tax-deferred based on the performance of index-linked interest options
• Cash surrender value can be accessed by policy loans and withdrawals, generally income tax-free if properly structured
• Premium payment flexibility
• Coverage flexibility
• More transparent than whole life

Variable universal life insurance

Variable universal life is a good fit for clients who are comfortable investing, have a suitable risk profile, and want the upside potential of the market but can withstand potential downside exposure.  With this type of insurance, cash value potentially grows with the performance of the investment options selected by the client. This is the only type of life insurance where there is the potential to exceed the cash value generated by other types, but there is also the potential for loss, including possible loss of principal invested. It offers the most upside and downside of any of the types of insurance.

• Cash value potentially grows tax-deferred (but can also decline) with the performance of the investment options chosen
• Cash surrender value can be accessed by policy loans and withdrawals, generally income-tax-free
• Premium payment flexibility and face amount flexibility (need evidence of insurability to increase face amount)
• Many investment options to choose from — often 50 or more.

Client materials