In choosing the type of life insurance policy you purchase, consideration must be given to the need which is being filled; e.g., funding retirement needs, creation of an estate, payment of estate settlement costs (federal and state death taxes, last illness and burial costs, probate fees, etc.), business buyout, key-man coverage, etc.
Long-term Level Premium Term:
Level Premium, Level Coverage, No Cash Value: The annual premiums are fixed for a period of time, typically 5, 10, 15 or 20 years. Suitable for financial obligations which remain constant for a short or intermediate period; e.g., income during a minor’s s dependency.
Whole Life:
Level Premium Level Coverage, Cash Values: Cash value typically increases based on insurance company’s general asset account portfolio performance. Suitable for long-term obligations; e.g., surviving spouse lifetime income needs,. estate liquidity, death taxes, funding retirement needs, etc.
Universal Life:
Level or Adjustable Premium and Coverage, Cash Values: Cash values may increase, based on the performance of certain assets held in the company’s s general account. Suitable for long-term obligations or sinking-fund needs: estate growth, estate liquidity, death taxes, funding retirement needs, etc.
Variable Life and Variable Universal Life:
Level / Adjustable Premium, Level Coverage, Cash Value: Suitable for long-term obligations and those who are more active investors and for estate growth and death tax liquidity.