B—Life Insurance Products

Below is a list of general life insurance product design categories:

TERM INSURANCE. If an estate plan is to be built on a solid foundation, life insurance protection is essential. Term insurance provides protection for a limited period of time. However, the premium for this protection will usually increase, until it becomes prohibitively expensive for most people to maintain. While term insurance can provide a lot of protection for a lesser cost, it builds no cash values and has no permanent values. While some term insurance is “convertible” to permanent coverage and can preserve insurability, it is important to understand the policy details pertaining to conversion because sometimes the ability to convert is limited in time or to certain (undesirable) products in the carrier portfolio.

WHOLE LIFE INSURANCE, in contrast to term insurance, provides for a tax-deferred build-up of cash values over the life of the contract. Guaranteed whole life, with cash accumulation capabilities enhanced by recent modifications to IRC 7702, remains the top selling permanent life insurance product in the U.S. This cash value element, combined with level or limited premium increases, means that the death benefit will be available for an unlimited period. While the outlay for permanent insurance, including whole life, is greater than term insurance in the early years, most plans provide for payment of a level premium. Typically, both the cash values and the death benefits are guaranteed, unless they are dependent upon payment of projected dividends.