Life Insurance

Term Life Insurance

General Investment Features

• Term insurance has no value except for the death benefit.

• Premiums are exchanged for the death benefit.

• It is the most inexpensive way to provide life insurance coverage.

• Premiums will increase as insured ages.

• Policy is in force for a specific period.

Tax Considerations

• Loans from the policy may be subject to taxation in certain situations.

• Surrender of the policy could cause a taxable event.

• The death benefit is not subject to income tax.

Permanent Life Insurance

General Investment Features

• Premiums are exchanged for the death benefit.

• Cash Values build up in the policy.

• Types sold through the broker dealer include:

- Whole Life

_ Policy stays in force for lifetime of insured unless it is canceled or lapses.

_ Premiums typically remain level for life of the policy.

_ Insurance Company invests the premiums in a conservative portfolio and the policy owner has no say in how the money is invested. They receive a fixed rate of return determined by the insurance company.

- Universal Life

_ Combines the low cost coverage of term insurance (see Term Life section) with a savings portion, which earns money market rates.

_ As policy owner ages and has increases in income, policy can be adjusted without any charge or complications such as qualifying for coverage. They can increase or decrease premium payments and coverage or shift a certain portion of premiums into the savings account.

- Variable Life

_ Allow policyholders to invest the cash value of the policy in stock, bond, or money market portfolios. Investors can elect to move from one portfolio to another and rely on the professional management to make decisions for them.

_ Some companies offer a guaranteed death benefit.

_ You can purchase either Variable Whole Life or Variable Universal Life.

Tax Considerations

• Loans from the policy may be subject to taxation in certain situations.

• Surrender of the policy could cause a taxable event.

• The death benefit is not subject to income tax.

Market Values

• The insurance company bears the risk of return on whole life or universal life policies.

• The investor bears the risk of return on variable life. The return will fluctuate as the market moves up and down and will react based on the holdings of the portfolio.