Life Insurance

© Copyright 2004-2019 Working American Benefits, Inc. and Hemera, Inc.  All Rights Reserved.

Home | About Us | Contact Us | Product List | Related Links

Having Life Insurance coverage can improve your life! There are several ways in which it does this:


·    Life insurance brings a sense of comfort to people knowing that if they were to pass away, their families would be taken care of financially.

·    Life insurance helps to protect ones assets from creditors.

·    Life insurance allows one to establish a protected fund for retirement. It provides a base upon which one can create a retirement fund.

·    Life insurance provides a tax-free death benefit for the insured’s beneficiaries, thus allowing them to better settle estate issues at the passing of the insured. Plus, many enhancements that can be done to life insurance to create a lasting legacy for the beneficiaries.

·    Taxes are treated quite favorable in life insurance.  Through tax-free withdrawals and tax-free loans recipients can realize a greater portion of the cash in a life insurance policy than in any other taxable financial instrument.  This makes it a great way to diversify ones portfolio.

·   Life insurance can be enhanced with additional coverage called “Riders”. A life insurance policy can be enhanced with “Living Benefits” through the addition of riders.  Living Benefits, by the very name, are benefits the insured can access while alive for reasons such as accidents, critical illnesses, chronic illnesses, Long/Short Term Care, a terminal illness, disabilities, loss of income, hardship, retirement and lifestyle.

·   Life insurance is flexible and versatile, and can be designed to meet specific needs, such as College Planning/Funding, Mortgage Protection, Business Buy Sell Agreements, Student loans and other loans protection, Estate Planning, Wealth Transfers, to name a few.

·   Life insurance can even be considered to be FREE!  One very popular rider on some Term Life insurance is the Return of Premium (ROP) rider.  This rider returns the premium one spent on a term life insurance policy at the end of the life of the policy if the insured is still alive.  When this occurs, the life insurance could be considered to have been FREE!


With these features and benefits, Life Insurance should be the foremost financial instrument everyone should own.  The need for life insurance should be taught in schools.


There are basically 4 types Life Insurance:


·    Term Life Insurance 

·    Whole Life Insurance 

·    Universal Life Insurance 

·    Variable Life Insurance 


Term Life Insurance


Term Life insurance is designed to provide protection for a stated period of time, expiring at the end of the period without value if the insured lives for longer than the stated period.  The period, called the "Term", can be from 1 to 30 years, but is usually for 5 to 20 years.  Term life insurance is best suited for someone who wants or needs temporary protection - in other words, protection for a specific number of years.


Simply put, Term life insurance pays out only if the insured dies within the "Term" of the policy.  For example, if someone buys a 10-year Term Life insurance and dies during the 10 years, then the policy will pay the full death benefit.  If the insured dies, however, in the 11th year after the policy went into effect, the policy pays nothing.


Most Term Life insurance can be renewed or converted.  If the Term Life contract allows it, the policy owner may renew the policy before its termination date without evidence of insurability (that is,  without having to prove good health).  Also, the policy owner can convert the Term Life policy to a Whole Life (or other permanent plan) before the policy's termination date without evidence of insurability.


The most common type of Term Life insurance is Level Term. This means that the policy provides a level (unchanging) amount of insurance for the specified period.  Level Term Life insurance is what we sell.



Whole Life Insurance


Whole Life Insurance is permanent insurance protection for the "whole of life", i.e., from the policy issue date to the date of death of the insured, or age 100 (120 in many new policies), whichever comes first, and the premiums are paid.  Whole Life insurance is characterized by level premiums, level death benefits and cash value.  Whole Life insurance is also known as "permanent" or "cash value" insurance and is further characterized by fixed premium, fixed face amount, fixed interest and fixed cash value accumulation.  This means that all these items are unchangeable throughout the life of the policy, but these fixed values make future policy performance projection very easy and accurate.


The death benefit payable is the face amount of the policy, (the amount written on the face of the policy), which remains constant throughout the policy life.  The premiums are set at the time of purchase and also remain constant throughout the policy life.  Whole Life insurance endows (matures) at age 100 (120 in many new policies). This feature combined with its cash-value feature, provides "living benefits" for the policy owner.


The Cash Value is an accumulation or savings element of the insurance.  This cash value builds over the life of the policy owing to the fact that Whole Life insurance plans are credited with a certain guaranteed interest rate, and the interest earned is credited to the policy on a regular basis.  The cash value, also called the Cash Surrender Value, represents the amount of money the policy owner would get if he/she terminated the  policy prematurely.  The amount of cash value in a policy at any given time will depend upon; (a) the face amount; (b) the amount of premium paid; and (c) the length of time the policy has been in force.  For most whole life insurance policies, the cash value can only be accessed through policy loans.


The obvious Living Benefit a Whole Life insurance provides is through the cash value build-up in the policy.  A policy owner can borrow from the cash value at reasonable interest rates if there is a need for money.  It is not a requirement of the policy that the loan be repaid, but if the loan is still outstanding when the insured dies, the loan amount plus any interest due will be subtracted from the death benefit before it is paid to the beneficiaries.


There are other Living Benefits a whole Life insurance can provide through “riders” attached to the policy.  A rider is a sub-policy attached to the main policy for a particular purpose—somewhat like adding rooms to a house.  Critical Illness, chronic illness and terminal illness are 3 living benefits many modern whole life insurance policies carry today to attract buyers.  Waiver of Premium is another living benefits that has traditionally been offered by a whole life insurance policy.



Universal Life (UL) Insurance


Universal Life (UL) is a variation of Whole Life insurance.  The main difference is its great flexibility.  Unlike Whole Life with its fixed premium, fixed face amount, fixed interest and fixed cash value accumulation, Universal Life allows the policy owner to determine the frequency of premium payments and to adjust the face amount up or down depending on changing needs.  The interest rate also fluctuates and is dependent upon  current market conditions.   However, the policy has a guaranteed minimum interest rate, usually 2% to 4%, that the insurance company will pay regardless of the state of the economy.


As premiums are paid and as cash value accumulates, interest is credited to the policy's cash value either at the current interest rate (determined by the state of the economy), or at the minimum guaranteed interest rate specified in the policy. To take advantage of high interest rates when the economy is good, a policy owner can elect to pay more into the policy adding to the cash value account, subject to certain guidelines controlling the relationship between the cash value and the policy's face amount.


Another difference between the Universal Life policy and the Whole Life policy is the fact that partial withdrawals can be made from the policy's cash value account. (Whole Life allows access to the cash value only through loans or complete surrendering of the policy).  Also, the Universal Life policy owner may surrender the policy for its entire cash value at any time.


Universal Life insurance offers two death benefit options.  Under Option One, the policy owner purchases a specified amount of insurance.  The death benefit is equal to the specified amount which is comprised of the cash values plus the remaining pure insurance.  The pure insurance is decreasing term insurance, i.e., each year, the amount of pure insurance decreases.  However, this decrease is offset by increasing cash values such that the specified amount (face amount) is maintained.  High interest earnings over a long period of time can cause the cash value to rise above the specified amount, thus increasing the death benefit to an amount greater than the specified amount.


Under Option Two, the death benefit is equal to the face amount of pure (level term) insurance plus the rising cash values. As the cash value increases,  the death benefit increases.  However, there are guidelines governing the rise of the cash value in proportion to the pure insurance.  For the product to continue to be considered "insurance" under Tax Laws, a certain level of pure insurance must be maintained.



Variable Life Insurance


Variable Life insurance is permanent insurance  with many of the same characteristics of Whole Life insurance.  The main difference is the way the policy's cash values are invested.  With Whole Life, the policy's cash values are kept in the insurance company's general account along with the insurance company's own funds and are invested and managed by the insurance company.  With Variable Life policies, the cash values are kept in the insurance company's separate account which house stocks, bonds and other securities, and invested in the securities market at higher risks.


With traditional Whole Life, the benefit is fixed and guaranteed, but with Variable Life, the benefit varies with the performance of the securities market.  There is, however, a minimum guarantee death benefit equal to the face amount at policy issue and is based on an assumed rate of return of usually 4 or 5%.



Modern Variations of Traditional Life Insurance



Indexed Whole Life (IWL) Insurance


Equity Indexed Whole Life (IWL) insurance is a permanent life insurance policy that accumulates cash value based upon the performance of an external index such as the stock market indices (S&P 500, NASDAQ, etc.).   Indexed Whole Life insurance is fixed and inflexible like any other whole life plan.  However, the purpose of the index is the indexing of inflation, i.e., the policy adjusts itself for inflation each year, protecting you (the policy owner) from the effects of possible inflation. The performance of the external index provides an inflation factor on top of the guaranteed rate paid to the policy. The death benefit never changes and the cash value will equal the death benefit when you reach age 100 (120 in many new policies).


Single premium indexed whole life (SPIWL) is a great new concept that combines all the guarantees of whole life insurance with the growth of an index annuity and the chronic illness protection of a long term care policy.  It’s being used to replace the traditional Long Term Care (LTC) policy.  To attract buyers, an SPIWL may offer a bonus as a percentage of the single premium.  The bonus is designed to offset some or all of the expenses a buyer may have incurred in obtaining the money for the SPIWL.  For example: If the buyer cashed in an annuity to buy the SPIWL he/she may have had to pay income tax and/or surrender charges. 


A typical SPIWL  to attract buyers may advertise the following features:


     10% bonus

      Return of premium guarantee

•   Incredible indexing options

      High fixed rates

•  Tax-free death benefits

     Tax-free chronic illness benefits

      No nursing home required

      Fail only 2 of 6 activities of daily living

      Can receive care at home!

Variable Whole Life Insurance


Variable whole life insurance combines the features of a traditional whole life policy and a variable life policy.  It combines the death benefit guarantees of a traditional whole life insurance policy with variable subaccount investment options.  It is a fixed-premium whole life insurance policy in which the policy owner controls  and manages the investments supporting the policy. The policy owner directs how policy investments are made.


The changes in the policy’s cash values and death benefits are directly related to the investment performance of the underlying pool of assets in the subaccounts. If the performance is positive, the death benefit and cash values will grow. If the performance is negative, the death benefit and cash values will decline.  Although the policy’s death benefit can increase through the investment performance of the variable subaccounts, the policy guarantees that the death benefit will not fall below a minimum amount (usually the initial face amount) even if the invested assets decline in value. The policy owner can access cash values through policy loans.


Index Universal Life (IUL) Insurance


Indexed Universal Life (IUL) is flexible-premium universal life insurance that takes the death benefit, guarantees, safety and other features of permanent life insurance and combines them with the opportunity to earn interest based on the upward movement of a stock market index.  What makes Index Universal Life (IUL) insurance unique is that unlike most non-variable permanent life insurance products where the policy's cash value grows according to an interest rate declared by the issuing insurance company, in contrast, Indexed Universal Life offers cash-value growth is linked to the performance of a stock market index, providing the opportunity to earn market-linked interest – without the risk of investing directly in the stock market. 


The risk profile of the Index Universal Life (IUL) policy owner is very moderate.  The policy owner experiences:


·    Declared current interest via the Fixed Account or market-linked returns in Index Accounts subject to participation rates and caps. Excludes dividends.

·    Guaranteed minimum rate of return, gains are locked in and there is  downside protection via index floor (guaranteed minimum interest rate).

·    Regulated as an insurance product and not as security.

     ·   Although Indexed Universal Life products have greater upside potential, most have lower guaranteed crediting rates.


Like other Universal Life products, Indexed Universal Life offers:


·   A death benefit that's generally free from federal income taxes1.

·   The potential (and tax-deferred) growth of a policy cash value that can be used for living needs1.

·   A fixed account that pays a guaranteed minimum interest rate.

·   A No-Lapse Guarantee provision2.

·   Typical costs associated with life insurance coverage.

·   The ability to choose certain policy features and to adjust those features as insurance and financial priorities change. For example, policy owners can determine the amount and timing of premium payments and can increase or decrease the policy's death benefit after the policy is issued3.


1 The proceeds paid from a life insurance policy because of the death of the insured are generally excludable from the beneficiary's gross income for income tax purposes. Growth on the accumulated cash values is generally taxable only upon withdrawal. Ordinarily one is allowed to withdraw up to the premiums paid into the policy. Therefore, if withdrawals exceed the premiums paid into the policy adverse consequences may result. A policy withdrawal will reduce the policy's death benefit and cash value.


If the life insurance policy is not a Modified Endowment Contract, policy loans from the policy are generally not subject to income tax. A policy loan or withdrawal from a Modified Endowment Contract may be considered a taxable event to the policy owner. Policy owners should consult with their tax advisor or attorney for advice on their specific situation.


2 Provided premium payments were made as required.
3 Policy changes may necessitate additional underwriting.


Hint: The key to choosing the right Indexed Universal Life product is to first consider the life insurance features and guarantees. Then consider index factors: indices offered, crediting methods, participation rates and caps.  The cap and participation rate should be examined simultaneously, as the combination of these two will instrumental in determining the total Index Credit.



Variable Universal Life (VUL) Insurance


Variable Universal Life (VUL) insurance is a product that blends many features of Whole Life, Universal Life and Variable Life.  The most outstanding of these features are premium flexibility, cash value investment control, and death benefit flexibility. 


Every VUL is issued with a minimum scheduled premium based on an initial specified death benefit, for example, $100,000. However, after the first year of paying the premium for $100,000, policy owners can pay what ever premium they wish, with certain limitations.  There are maximum and minimum premium limits that are different from the first year's premium.  Policy owners may increase or decrease the face amounts or the premiums as long as the guidelines are followed.


Cash value in a VUL insurance plan is maintained separately from the plan.  At the time the policy owner completes the application for insurance, he/she elects to have the premium and cash values allocated to one or more investment options. These are "sub-accounts" that are similar to mutual funds, and are either created and managed by the insurance companies, or created and managed by investment companies (mutual funds companies) for insurance companies.  Funds are held in a separate account from the insurance company's funds, and are invested in the securities market.  The policy owner directs the investments and therefore assumes the risks.


VUL policies generally offer a level death benefit, which provides for a fixed death benefit of the initial face amount, until the cash value reaches the fixed death benefit amount.  Once the cash value rise above the level of the fixed death benefit amount, then the death benefit becomes a combination of the cash values and the amount of pure insurance (corridor) the policy must maintain to be still considered to be insurance for tax purposes.


VUL policies also offer a variable death benefit option, which provides for a constant level specified amount (face amount), and any cash values accumulated are added to the level specified amount so that at all times, the death benefit is a combination of the two amounts.  Because the cash values fluctuate with the market, the true death benefit varies as well, and can only be known at the time of the death of the insured.


VUL insurance policies permit partial withdrawals, allowing the owner to tap the cash value without owing the insurance company any money.  Policy owners do not have to repay these funds and no interest accrues on the money withdrawn.



Life Insurance Riders


Life insurance can be enhanced with “Riders”.  A rider is a sub-policy attached to the main policy for a particular purpose.  A rider may access the death benefit or cash value (of a cash-value life insurance policy) for a particular purpose, or it may provide a benefit quite independent of the death benefit or cash value. Some of the more popular riders and the purposes they serve are the following:


Accelerated Death Benefit Riders

Accelerated death benefit riders pay some or all of a life insurance policy’s death benefit to the insured during his or her lifetime, provided that the insured meets the conditions for payment specified in the rider. The most common accelerated death benefit riders provide for payment if the insured has been diagnosed with:

·   a critical illness

·   a chronic illness  (requiring Long Term Care)

           inability to perform two or more activities of daily living (ADLs), such as bathing, continence, dressing, eating, toileting, and transferring; or

          requiring substantial supervision because of a cognitive impairment.

·   a terminal illness.  (requires that life expectancy be no more than 12 months)

An amount received under a life insurance policy on the life of a terminally ill insured is generally treated as an amount paid because of the insured’s death. Hence, such amounts are not includible in income. Accelerated death benefit payments made to an insured requiring Long Term Care can also avoid inclusion in income up to specified maximums. (For 2008, the daily dollar amount of this exclusion for periodic payments for long term care was $270.)

Waiver of Surrender Charges for Nursing Home Confinement Rider

Unlike the accelerated death benefits just discussed or Long Term Care insurance policies, this rider does not provide a dollar benefit. Instead, it waives the policy’s surrender charges if the insured is confined in a nursing home.

Term Insurance Riders

Term insurance riders provide additional life insurance protection for a specified period on the life of the policy insured, a child of the insured or  other persons. For coverage on children, coverage is typically limited to a nominal amount, such as $10,000. Other term insurance riders might be limited in amount to some multiple of the basic policy’s death benefit, such as two or four times the amount.

Waiver of Monthly Deductions or Premium Riders

The most popular life insurance rider is the waiver of premium rider that waives premiums if the insured becomes totally disabled. Two versions of this waiver rider are generally available to insured persons younger than age 60: (1) waiver of monthly deductions; (2) waiver of premiums.

Waiver of Monthly Deductions

The insurance company agrees to forgo taking monthly deductions from the policy if the insured become totally disabled, as defined in the rider, before age 60. Those monthly deductions normally include the cost of insurance charges and administration and other expense charges.

Waiver of Premium

A waiver of premium rider waives the entire premium, rather than the monthly deductions, if the insured is totally disabled before age 60. Both riders require payment of an extra premium.

No-Lapse Guarantee Rider

A universal life insurance policy—whether a declared-rate, indexed or variable policy—lapses when the accumulated value cannot cover the insurer’s monthly deductions. However, some insurers offer a rider providing a no-lapse guarantee. Such a rider ensures the policy will not lapse because of insufficient accumulated value provided premium payments are made when scheduled. If scheduled premium payments are late or missed, the duration of the no-lapse guarantee may be reduced.

Source: Boros, Joan and Gary Cohen. “White Paper on Fixed Indexed Insurance Products Including ‘Fixed Indexed Annuities’ and other Fixed Indexed Insurance Products.” Milwaukee: National Association for Fixed Annuities, 2006.







Manhattan Life Group


Get A Quote

Term Life Insurance

Whole Life Insurance

Genworth Financial


Get A Quote

Term Life Insurance

Term Life Insurance with  ROP

Universal Life Insurance

Indexed Universal Life

Standard Life and Accident Insurance Company


Get A Quote

Term Life Insurance

Whole Life Insurance

Banner Life Insurance Company


Get A Quote

Term Life Insurance

Universal Life Insurance

Kansas City Life Insurance Company


Get A Quote

Term Life Insurance

Term Life Insurance with  ROP

Universal Life Insurance

Indexed Universal Life

Whole Life Insurance

National Life Group (Life Insurance Company of the Southwest)


Get A Quote

Term Life Insurance

Universal Life Insurance

Indexed Universal Life

Whole Life Insurance

Variable Universal Life

Sagicor Life Insurance Company


Get A Quote

Term Life Insurance

Universal Life Insurance

Indexed Universal Life

Whole Life Insurance

Foresters Financial


Get A Quote

Term Life Insurance

Universal Life Insurance

Whole Life Insurance

Variable Life Insurance

Variable Universal Life