Term Life insurance policies are ordinarily underwritten for 10, 15, 20, or 30 years. The coverage or "face amount" of the policy is guaranteed for as long as you pay the premium. The premium amount is also guaranteed to remain level or unchanged for the duration of the term. As an example a 15 year $1,000,000 policy would have a guaranteed level premium for 15 years. As long as the premium is paid in full every year, $1,000,000 of coverage would be guaranteed for 15 years.
Many clients convert their term life insurance policy to a permanent Universal Life policy. Often times a conversion is requested for estate planning reasons or if you are no longer insurable. When you convert your Term life policy, the insurance company will issue a permanent Universal Life policy based on your current age without any medical evidence. Your rate will be based on the same underwriting classification you qualified for when your term policy was issued. For example if you obtained a preferred rate for your term policy and choose to convert your term to a permanent policy, the permanent policy will be issued at preferred regardless of your current health situation. Converting your policy will provide lifetime coverage at a guaranteed premium rate. Universal Life policies are cash accumulating policies that provide coverage for life with flexible premium schedules.
Whole Life Insurance is a permanent policy with dividends paid to the policy holders. Whole Life Insurance policies provide the best long term solution for your life insurance needs. Because the insurance carrier pays dividends on your Whole Life policy, you can choose to invest these dividends in additional insurance or to help pay down the premiums. By purchasing additional insurance with your dividends your cash value will grow and your face amount will get larger and larger. Your amount of coverage increases over the years, which allows you to keep an adequate amount of coverage as your salary and net worth increase.
This type of life insurance is essentially a hybrid between term life and whole life. You buy a return of premium policy for a set amount of time — say, 20 years. You make your payments every year, and in the event that you pass away, your heirs are paid the face value of your death benefit. Here's the part that appeals to a lot of people. Should you outlive your policy, the insurer sends you a tax-free check for the full amount that you've spent on premiums over the lifetime of your coverage. It’s a win/win situation.