Life Insurance

There are three parties in a life insurance transaction: the insurer, the insured, and the owner of the policy (policyholder), although the owner and the insured are often the same person.
Another important person involved in a life insurance policy is the beneficiary. The beneficiary is the person or persons who will receive the policy proceeds upon the death of the insured.

Life insurance may be divided into two basic classes – term and permanent.

Term life insurance provides for life insurance coverage for a specified term of years for a specified premium. The policy does not accumulate cash value.
Permanent life insurance is life insurance that remains in force until the policy matures, unless the owner fails to pay the premium when due.
Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy.
Universal life insurance (UL) is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for a higher internal rate of return. A universal life policy includes a cash account. Premiums increase the cash account.

If you want insurance protection only, and not a savings and investment product, buy a term life insurance policy.
If you want to buy a whole life, universal life, or other cash value policy, plan to hold it for at least 15 years.
Canceling these policies after only a few years can more than double your life insurance costs.
Check the National Association of Insurance Commissioners website (www.naic.org/cis ) or your local library for information on the financial soundness of insurance companies.