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What is term insurance?
Term Insurance
covers you for a term of one or more years. It pays a death benefit
only if you die in that term. Term insurance generally offers the largest
insurance protection for your premium dollar. It generally does not build
up cash value. You can renew most term insurance policies for one or more
terms even if your health has changed. Each time you renew the policy
for a new term, premiums may be higher. Ask what the premiums will be
if you continue to renew the policy. Also ask if you will lose the right
to renew the policy at some age. For a higher premium, some companies
will give you the right to keep the policy in force for a guaranteed period
at the same price each year. At the end of that time you may need to pass
a physical examination to continue coverage, and premiums may increase.
You may be able to trade many term insurance policies for a cash value
policy during a conversion period — even if you are not in good health.
Premiums for the new policy will be higher than you have been paying for
term insurance.
What
is Cash Value Life Insurance?
Cash Value Life
Insurance is a type of insurance where premiums charged are higher
at the beginning than they would be for the same amount of term insurance.
The part of the premium that is not used for the cost of insurance is
invested by the company and builds up a cash value that may be used in
a variety of ways. You may borrow against a policy’s cash value by
taking a policy loan. If you don’t pay back the loan and the interest
on it, the amount you owe will be subtracted from the benefits when you
die, or from the cash value if you stop paying premiums and take out the
remaining cash value. You can also use your cash value to keep the insurance
protection for a limited time or to buy a reduced amount without having
to pay more premiums. You also can use the cash value to increase your
income in retirement or to help pay for needs such as a child’s tuition
without canceling the policy. However, to build up this cash value, your
must pay higher premiums in the earlier years of the policy. Cash value
life insurance may be one of several types; whole life, universal life,
and variable life are all types of cash value insurance.
Tell me about Whole Life Insurance.
Whole Life Insurance
covers you for as long as you live if your premiums are paid. You generally
pay the same amount in premiums for as long as you live. When you first
take out the policy, premiums can be several times higher than you would
pay initially for the same amount of term insurance. But they are smaller
than the premiums you would eventually pay if you were to keep renewing
a term policy until your later years. Some whole life policies let you
pay premiums for a shorter period such as 20 years, or until age 65. Premiums
for these policies are higher since the premium payments are made during
a shorter period.
Explain Universal Life Insurance.
Universal Life
Insurance is a kind of flexible policy that lets you vary your premium
payments. You can also adjust the face amount of your coverage. Increases
may require proof you qualify for the new death benefit. The premiums
you pay (less expense charges) go into a policy account that earns interest.
Charges are deducted from the account. If your yearly premium payment
plus the interest your account earns is less than the charges, your account
value will become lower. If it keeps dropping, eventually your coverage
will end. To prevent that you may need to start making premium payments,
or increase your premium payments, or lower your death benefits. Even
if there is enough in your account to pay the premiums, continuing to
pay premiums yourself means that you build up more cash value.
Insurance Products are:
- Not A Deposit
- Not FDIC Insured
- Not Insured By Any Federal Government Agency
- Not Guaranteed by the Bank
- May Go Down In Value
These products offered through certain insurance underwriting companies are
not a deposit and therefore are not FDIC insured; neither are they insured
by any Federal government agency, nor are they obligations of, or guaranteed
by Dubuque Bank and Trust or DB&T Insurance, Inc. and may involve investment
risk and may go down in value, including possible loss of principal.
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