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Life Insurance
Consumers or business owners, who are unsure of the type of life insurance to purchase, should contact a Provider agent. Our agents can explain the difference between term, whole, universal and variable life insurance and which kind of policy is the best fit for you. Here is a brief explanation of each type of policy:
- Term insurance – Term policies are purchased for a specific period of time. If the insured passes away during that period, then the insured’s beneficiary is paid the dollar value of the policy.
- Whole life – Whole life policies are effective for the insured’s entire life. Premiums, which insurance companies invest, stay the same during the life of the policy. Some firms use the investments to pay policyholders dividends, but the rate of return is generally not that high.
- Universal life – Universal life policies are more of an investment vehicle. The insured specify how much he will pay over the premium, and the insurance company decides on the investment vehicle, which is typically limited to bonds and mortgages. Returns are deposited into a cash-value account that can grow or be used to pay premiums. There are Type I or Type A policies under which the cash account goes toward the face value of the policy upon the death of the policyholder. In addition, there are Type II or Type B policies under which the beneficiary receives the face value of the policy plus all or most of the money in the cash account. While Type II policies are meant to partially offset inflation, it should be noted that the premiums increase as policyholders age.
- Variable life – Variable policies offer more investment options than universal life policies. As with a universal policy, returns on investments under variable policies can pay for premiums or accumulate in an account. Beneficiaries receive the face value of the policy or the face value and all or a piece of the cash account.
