Life Insurance

This is the most commonly purchased life insurance policy purchased and has the least cost associated with the coverage

The cost of a policy is based largely on the insured person's health and age at the beginning of the term, says the III. Declining health or increasing age can make it difficult or more expensive to acquire a new term policy as you get older.

So, when your term ends, you'll likely pay higher premiums (or regular payments) if you renew or purchase a new policy.

If your policy is renewable, you may have the option of extending your coverage for another term, up to a specified age.

Also keep in mind that some term policies are convertible to a permanent life insurance policy, if your eventual goal is lifelong coverage. Check with one of our agents for specifics on convertible policies, as the conversion typically has to happen within a specified time period.

Certain aspects of whole life insurance can make it an appealing choice.

Your premiums and death benefit are fixed. In most cases, the premium and death benefit stay constant for the duration of a whole life policy. That means you likely won't have to worry about cost increases as you get older, and your loved ones will know the amount of life insurance proceeds to expect when you do pass on.

You can withdraw funds or take out a loan. A whole life policy can serve as a source of emergency funds for you if something goes wrong; you can also take out a loan against the policy for something like college tuition. That's because a portion of each of your premium payments is funneled into a savings component of the policy called the "cash value." Over time, the cash value builds, and you're able to withdraw funds or borrow against it. The rules on how and when you can do that vary by company. And there are guidelines to follow, so that you don't inadvertently reduce the death benefit or create a tax burden.

You have a guaranteed rate of return. The cash value of a whole life policy is guaranteed to earn a minimum amount of interest.

You can withdraw money or borrow against it. When you pay your premium, a portion of each payment goes toward the death benefit, but a portion also goes to building up the policy's savings component (also known as the "cash value"). Over time, after money has accumulated, you can withdraw or borrow against the cash value of the policy for emergencies. However, it's important to know that this may cause a reduction in the policy's death benefit or create a tax implication for you to manage.

Your cash value earns interest. The cash value of a fixed universal life policy generally earns interest that's in line with current money market rates. Of course, the interest rate will fluctuate along with the market, which means the interest you receive may also go down, but some companies offer protection against that with a minimum performance guarantee on the policy.

You have flexibility with premiums. You have the ability to lower or even stop paying premiums on a universal life policy, as long as the cash value of your account can cover the costs. This can be helpful if money becomes tight. But there can be negative consequences, too, for instance, your coverage may end if you use up the account's cash value to pay for premiums.

You can adjust the death benefit. The flexibility of a universal life policy also extends to the death benefit. After a time, you may want to increase the amount that's paid out upon your death, which is something that many companies allow for as long as you pass a medical exam, says the III. Likewise, you might choose to reduce the death benefit, to reduce the cost of the policy.