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Life Insurance

Easing the financial burden of those left to navigate your loss.

Life Insurance - Features

Features

Regardless of the policy type, most life insurance policies have some common features. These features are built around the purpose of life insurance: a promise to provide financial protection for your loved ones after you die.

• Death Benefit: The amount of money the insurance company will pay when the insured person dies. Typically, this benefit is income-tax free.

• Beneficiary(s): The person or people who receive the death benefit. The beneficiary doesn't have to be a person. You may choose to leave the death benefit to an entity or organization.

• Policy Term: The amount of time the policy will remain in force as long as the premiums are paid. For a term policy the term is a specific number of years, such as 10, 20, or 30. A long term or permanent policy lasts for the life of the insured. For a Whole Life policy will remain in force as long as premiums are paid. For a Universal Life policy it will remain in force as long as the policy is funded properly to pay the monthly expenses.

• Premium: The payments needed to keep the policy in force.

• Cash Value: The policy’s investment component that builds over time and can be cashed out or borrowed against. A term policy has no cash value.

Life Insurance - Policy Types

Term Life Insurance

A term life policy provides coverage for a specific period, usually between 10 and 30 years. It's often referred to as “pure life insurance” because, unlike whole life insurance, it doesn't accumulate cash value. Its primary purpose is to ensure that your beneficiaries receive a payout if you pass away during the term.

Most individual term policies feature level premiums, meaning you pay the same amount each month. Once the term ends, coverage ceases, and you’ll need to either go without insurance or purchase a new policy, which is likely to be more expensive as you age. However, many providers, including Guardian, allow you to convert a term policy to permanent life insurance for part or all of the coverage period. If you obtain term life insurance through your employer, keep in mind that rates are typically based on your attained age, which means they will increase over time.

Permanent - Whole Life

A whole life policy is one of the most straightforward forms of permanent life insurance, providing coverage for your entire life. Like other permanent options, it includes a cash value component: a portion of your premiums is allocated to this account, which grows over time on a tax-deferred basis, meaning you won’t owe taxes on the gains until you withdraw them.

Whole life policies have three key characteristics:

1. Level Premiums: Your premium payments remain the same throughout your lifetime, making budgeting predictable.

2. Guaranteed Death Benefit: As long as you pay the required premiums, the policy guarantees a death benefit to your beneficiaries.

3. Guaranteed Cash Value Growth: The cash value accumulates at a guaranteed rate, providing a reliable growth mechanism.

The cash value offers several significant benefits during your lifetime. Although it takes a few years to build a substantial amount, once established, you can borrow against it, use it to help cover premium payments, or even surrender the policy for cash, which can be particularly useful during retirement. This combination of lifelong protection and financial flexibility makes whole life insurance an appealing choice for many.

Permanent - Universal Life

A universal life policy is a permanent insurance option that not only provides lifetime coverage but also accumulates cash value, similar to whole life insurance. The key distinction lies in its flexible premium structure. You can adjust the amount you contribute to the policy—either increasing or decreasing payments—within certain limits set by the insurer.

If you choose to pay less than the recommended amount, be aware that this may lead to the need for larger payments in the future to keep your coverage active. This type of policy grows cash value over time, which you can borrow against or withdraw, offering financial versatility. It's particularly beneficial during significant life changes, such as having children, changing jobs, or starting a business, as it provides both the security of insurance and the flexibility to adapt to your evolving financial situation.

A variable universal life insurance policy (VUL) gives you the option to tie cash value growth to grouped stock market and bond investments called "subaccounts." However, growth in a variable life insurance policy is not guaranteed as in a standard universal or whole life policy. You, the policyholder, assume investment risk for any losses – just as you would with a brokerage account.

An indexed universal life policy (or indexed UL) lets you tie all or part of your cash value growth to the performance of a broad securities index, such as the S&P 500. There's a floor and cap for the minimum and maximum rates of return, so while you won't realize all the gains of your reference index, you won't suffer all the losses either.