The Fayetteville Press Newspaper

Life insurance isn’t something we think about every day. But there are times when it is unavoidable—for example, when you marry, have children, or experience some other significant change in your life. If you’re thinking about life insurance for the first time, there are a number of considerations you need to make.

There are two types of life insurance: permanent and term. Permanent insurance comes with both a death benefit and a savings component, known as the cash value. There are several types of permanent insurance, including whole life, universal life, and variable life. All permanent insurance offers lifetime protection of the death benefit and the potential for cash accumulation.

Lifetime death benefit protection. As long as you keep the policy in force by either paying the requisite premium or making sure there is sufficient value to support the monthly charges, it is in effect for your entire life. No matter what may happen to your health, you can be covered, generally up to age 100. You will not need to “renew” your coverage at a later date.

Potential for tax-deferred cash accumulation.
The cash value component of permanent insurance means that you can access the cash value through withdrawals or loans, which may be tax-free.* The interest you earn on the cash value can be fixed (such as those available through whole life and universal life**), or can depend on the performance of the investments you choose, as in variable life.***
 
Term life insurance offers a death benefit only—there is no cash value. When you’re young, term life is generally less expensive than permanent life because it only covers you for a stated term, such as 1, 10, 20 or 30 years. When the term is up, if you wish to renew, you will generally have to pay more. If your health declines, renewal of your coverage will not only be more expensive, but may even become more difficult to purchase.

Universal Life May Offer the Best of Both Types

Universal life is a type of permanent insurance. It offers the benefits of permanent insurance, plus additional advantages.
1. Flexibility. You can choose between level or variable death benefits. You can also increase or decrease (a decrease in death benefit may trigger contract surrender charges) the death benefit to meet your changing needs, within policy limits. 
2. There is a guaranteed** minimum interest rate on the cash value.
3. Premium payments are flexible so you can design them to fit your budget. As long as there is sufficient cash value to support the premiums, you can choose the amount and timing of your payments.
4. Newer polices offer the ability to guarantee** no lapse protection—an important feature if guaranteeing your death benefit so that it will absolutely be there for your beneficiaries is of the utmost concern.

Is universal life right for you? It depends on your circumstances, your budget, and your needs. Contact a financial professional for a complete evaluation of your protection needs.

AXA Advisors, LLC does not provide legal or tax advice. Please consult your tax or legal advisor regarding your individual situation.

* Loans and withdrawals reduce the policy’s cash value and death benefit, and increase the chance that the policy may lapse. If the policy lapses, matures, is surrendered or becomes a modified endowment contract, the loan balance at such time would generally be viewed as distributed and taxable under the general IRS rules for distribution of policy cash values.

**Guarantees are based on the claims-paying ability of the issuing insurance company.

***Unless a “no-lapse guarantee” has been established and is paid, investment option performance that is less than expected could reduce the death benefit. This may also cause the policy to lapse and it may force the policy owner to contribute additional premiums above the planned premium to keep the policy in force.