Okay, summer is still ten days away on the calendar. But at our office in Reno, temperatures hit 100 degrees over the weekend. So we reasonably find ourselves thinking about one thing, and one thing only – ice cream!
As we help people like you protect your family with term life insurance, our minds keep wandering back to ice cream. And if life insurance was anything like ice cream, here’s what it would look like to us.
Term Life Insurance – Vanilla
For many years, term life insurance has been dubbed ‘plain ole life insurance,’ and for good reason. Term life offers pure life insurance protection, with very few added features. You won’t find things like cash value accounts, investment accounts, policy loans or long-term care benefits with term life. You will find value though, as term life is the least expensive form of life insurance you can buy. If all you want is protection, term life is probably for you.
With that said, some life insurance companies have started adding features and benefits to term life in an effort to gain and edge on their competition. You might find some of these options on your policy (usually included in the price):
Accelerated Death Benefit – This feature allows terminally ill people to receive part of the policy’s death benefit early. The logic being that this money could be used for medical expenses, hospice or other services intended to provide care or extend life.
Conversion Benefit – This feature allows the policy owner to ‘convert’ a term life policy into an approved permanent life policy from the same company. The conversion is typically to a universal life policy. The real advantage of this feature is that the insured person does not have to prove insurability again; meaning she does not have to complete an application or a paramed exam.
Return of Premium (ROP) Term Life Insurance – Strawberry
ROP term life hasn’t really taken hold as many thought when it was introduced several years ago. But some people do like the idea of getting their money back if they outlive their policy. And that’s basically how it works: live longer than the 15, 20 or 30-year term, and the life insurance company will return 100% of your premiums. If you cancel the policy prior to the end, you may receive a portion of the paid premiums back.
Term Universal Life (UL) Policy – Chocolate
A term UL policy is technically a universal life policy that has a premium structure life term life. The policy is typically set for a period of time like term, and the premiums are guaranteed to stay level during that time. The policy has features of a UL policy, like cash value, but really behaves like a term policy. However, there are more options to extend the policy at the end of the term than there are with term life.
Whole Life Insurance – Neapolitan
Now we’re getting into the rich stuff (ice cream-wise that is). Whole life insurance offers level premiums and protection for as long as you live. These policies typically include many features including cash value build-up and policy dividends. However, they can be expensive and may include high fees and cancellation penalties. Whole life policies are a good option for some people, but you need to be prepared to own one for a long time (at least 20 years) in order to see a decent return on your investment.
Universal Life Insurance – Mint Chocolate Chip with Gummy Bears
Yum, right? Okay, this one is my daughter’s favorite so I’m a little biased.
Universal life is the Cadillac of life insurance. It’s a permanent life policy that includes such features as varying premium payment amounts, varying death benefit, cash value accumulation and policy loans, to name just a few of the more common ones.
The investment portion of the policy can be guaranteed or variable. The cash value accumulation can be used to subsidize the cost of insurance at some point if it grows sufficiently. Premiums can be set to terminate at a certain age such as the policy owner’s planned retirement age, or after a certain period of time.
The biggest advantage a UL policy has is its inherent flexibility. Depending on the goals of the policy owner, the policy can be designed to accomplish maximum protection, maximum cash value accumulation or a combination of the two.
Of course, just like Baskin-Robbins, there are many flavors of these primary types of life insurance such as non-medical term life, accidental death, final expense and others. What makes them each different is usually just the inclusion of some feature like a simplified review process (non-medical policies) or long-term care benefits. Think of these as vanilla, strawberry or chocolate ice cream with your choice of toppings!
The Most Popular
Life Insurance Ice Cream Flavors?
According to The Food Channel, these are the top 5:
1. Vanilla – 29%
2. Chocolate – 8.9%
3. Butter Pecan – 5.3% (who knew?)
4. Strawberry – 5.3%
5. Neapolitan – 4.2%
Who can argue with numbers like these? Term life insurance is the clear winner!