Types of Life Insurance

Term life insurance provides pure death benefit coverage for a specified period. If the insured outlives the term, coverage ends with no cash value paid.

Common term lengths: 10, 20, 25, 30 years

• Key features:
• Renewable — can be renewed at expiry without medical evidence (at a higher premium reflecting older age)
• Convertible — can be converted to a permanent policy within a specified period without proof of insurability
• Decreasing term — death benefit decreases over time; commonly used for mortgage coverage
• Level term — death benefit stays the same throughout the term

Best for: Clients with temporary needs — mortgage coverage, income replacement during working years, covering debts.

Whole life insurance provides permanent (lifelong) coverage with a guaranteed cash value (savings component) that grows over time.

• Key features:
• Fixed level premiums for life
• Guaranteed cash value that grows tax-deferred
• Policy loans available against the cash value — no repayment schedule required but interest accrues
• Participating (par) policies may pay dividends based on the insurer's actual experience

Dividend options for par policies: 1. Cash payment 2. Reduce premiums 3. Accumulate at interest 4. Paid-up additions (PUAs) — purchase additional paid-up coverage (most popular — compounds the policy's growth) 5. Premium offset — use dividends to pay premiums once sufficient value accumulates

Universal life (UL) is a flexible permanent insurance product that separates the insurance component and savings component transparently.

• Key features:
• Flexible premium payments (within limits)
• Adjustable death benefit (increase requires new medical evidence; decrease is generally unrestricted)
• Savings portion earns interest at a declared rate
• Cost of insurance (COI) is deducted monthly from the account value
• Policy lapses if account value falls to zero

• Two death benefit options:
• Level — death benefit stays fixed; as account value grows, net amount at risk decreases
• Increasing — death benefit = face amount + account value; net amount at risk stays level

Term to 100 (T-100) is a permanent life insurance product that provides pure death benefit coverage to age 100 with level premiums but no cash value.

• Key characteristics:
• Simpler and typically less expensive than whole life
• No cash value, no dividends, no policy loans
• Level premiums for life
• Permanent coverage — does not expire (if premiums are paid)

Best for: Clients who want permanent coverage at a lower cost than whole life and do not need the savings component.