A life insurance policy is a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured's death.
Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage. It's important to note that death benefits from all types of life insurance are generally income tax-free.
|Term Life||Income replacement during working years||Designed for a specific period, such as 20 or 30 years||Typically less expensive||Usually Fixed||Generally income tax free to beneficiaries||Does not build a cash value|
|Universal Life||Wealth transfer, income protection and possibly tax-deferred wealth accumulation||Flexible, generally, for a lifetime||Generally more expensive than term||Flexible||Generally income tax free to beneficiaries||May build a cash value|
|Whole Life||Wealth transfer, preservation and tax-deferred wealth accumulation||For a lifetime||Generally more expensive than term||Usually Fixed||Generally income tax free to beneficiaries||Usually builds a cash value|
|Final Expense||Protection of family members from end of life expenses||For a lifetime||Low premiums||Usually fixed||Generally income tax free to beneficiaries||Does not build a cash value|