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The Four Basic Types of Life Insurance Policies

There are four types of permanent life insurance policies. Whole life insurance is considered the original permanent life insurance policy. Whole life policies feature fixed, level premiums, a fixed face amount, and the accumulation of cash value. With whole life, cash values accumulate on a tax-deferred basis and the policy can be canceled or surrendered for cash. Furthermore, policyholders can borrow against the cash value while keeping the policy in force or use it to provide cash to supplement retirement income.

Another type of permanent life insurance policy is universal life. Universal life insurance policies have been around since the early 1980s and also accumulate cash value. Like whole life policies, universal life insurance policies can be borrowed against, used to provide cash to supplement retirement income, or surrendered for cash. Universal life allows policyholders to adjust their coverage and premiums to suit their needs, as long as the amount paid is not less than the cost of the insurance.

Variable life insurance policies are another type of permanent life insurance. Variable life insurance policies build cash value, which is then invested in an account managed by well-known mutual fund companies. Many of the investment options available in a variable life policy are actually identical to some of the most famous mutual funds and are, in fact, often operated by the same fund managers. There is the potential for higher rates of return with variable life policies because of the nature of the account investments. Like other permanent life products, variable life can be borrowed against, surrendered for cash, or used to provide cash to supplement retirement income.

Survivorship life, also referred to as second to die life, provides a death benefit that is paid to the beneficiary after both insured people have died. Survivorship life insurance policies insure two healthy people, usually a married couple. Premiums on survivorship life policies are typically lower than the premium costs incurred when two separate policies are purchased. Survivorship insurance can be extremely beneficial in estate planning and the proceeds are often used to pay state taxes upon the second death. Second to die life, when used properly, can maximize the size of the estate to be passed on to heirs. No matter what your needs for life insurance, Spectrum Direct is here to help you. Need a permanent life policy or want to learn more about buying a term life insurance policy? Call Spectrum Direct to speak with an insurance professional today. Want to purchase a term life insurance policy? Get your free quote online.

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