Term vs. permanent life insurance
Life insurance policies have two main categories: term and permanent.
Term life insurance policies provide coverage for a specified period and then expire at the end of that allotted timeline. Permanent life insurance policies are designed to last a lifetime as long as premium payments are made.
Term life insurance
You can think of term life insurance as temporary life insurance. When you buy a term policy, you pay a fixed amount for coverage with a set expiration date. For example, a 20-year term policy would remain in force for 20 years from the day the coverage started as long as premiums were maintained. If you died during this period, your designated beneficiaries would receive the policy death benefit. If you live past your policy's term period and you want to remain insured, you'd need to buy another life insurance policy, or pay a new premium amount that may be significantly higher than your previous payments.
Permanent life insurance
In contrast, permanent life insurance policies don't have a set expiration date. These policies are designed to last your entire life, provided you keep making your required premium payments on time. Permanent life insurance policies offer an additional feature known as “cash value.” This is money in your policy that you can withdraw or borrow against. It is important to note that loans against an insurance policy accrue interest and decrease the death benefit and cash value by the amount of the outstanding loan and interest. There are three common types of permanent insurance policies:
Whole life insurance
Whole life insurance policies have a fixed premium, meaning you need to pay the same amount each year. Whole life insurance also provides steady, fixed growth on your cash value.
Universal life insurance
Universal life insurance policies have flexible premiums. You can change how much you pay each year; though you need to pay a minimum amount or the policy will lapse. Your earnings in a universal life policy can vary based on the specifics of your policy and the interest rates that are credited. Some years, universal policies may earn more than whole life and others they may earn less.
Variable life insurance
Variable life insurance policies allow you to invest a portion of your premium into he insurer's separate account, providing access to professionally managed investment options. You can potentially earn higher cash value with these policies. However, if your chosen investment options under-perform (or if sufficient premiums are not paid), the policy may lapse or not accumulate sufficient value to maintain the policy.
Permanent life insurance for veterans
If you are an active service member, you are most likely very familiar with SGLI (Service members' Group Life Insurance) policies. However, you may be less aware of your post-service life insurance options. If your time in the military is coming to an end, take the time to familiarize yourself Veteran’s Group Life Insurance (VGLI).
Veteran's Group Life Insurance
If you are a veteran, when you leave the service, you may have the option to convert your SGLI policy to a VGLI policy. You can enroll for the same amount of coverage you had under your SGLI plan, or a lesser amount if you prefer, and you may have the opportunity to increase your coverage every five years. (The current maximum amount of coverage available under a VGLI policy is $500,000.) Your coverage will never expire, so long as you pay your premiums, but your premiums will increase with age. Having health issues should not prevent your ability to enroll, as no proof of good health is required. Be forewarned: you only have one year and 120 days to decide to convert your SGLI to VGLI. You can get an idea of how much your future VGLI premiums will cost by reviewing this VGLI premium rate chart provided by the U.S. Department of Veterans Affairs
Short-term life insurance
A short-term life insurance policy typically provides coverage for less than a year. It's meant to cover you for a short period of time for a specific purpose. This could be due to travel, a temporary move or job or other short-term situation.
If you’re interested in learning more about life insurance options, Protective is here to help! Check out more resources on the Protective Learning Center or get a quote online.
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