Life Insurance Policies: Term, Permanent, Group, and Specialty Products
Term
Level term pays a face amount only if death occurs during the term and builds no cash value. Know decreasing term (mortgage protection), increasing term, renewable term (guaranteed renewal without evidence at a higher premium), and convertible term (converted to permanent without evidence, usually before an age limit). Return-of-premium term costs more.
Permanent
Whole life offers a level premium, guaranteed cash value, guaranteed death benefit, and lifetime coverage; limited-pay and single-premium versions compress premiums. Universal life offers flexible premiums, an adjustable death benefit, and cash value credited interest with a guaranteed minimum; cost of insurance rises with age, and Option A (level) versus Option B (increasing) death benefit drives the corridor test. Indexed UL credits interest by an index formula with caps and floors. Variable life and variable UL place cash value in separate accounts, so the owner bears investment risk and the sale requires securities registration plus a prospectus. Survivorship (second-to-die) coverage insures two lives for estate liquidity.
Group and specialty
Group life is a master contract issued to the employer with certificates to members; the group, not the individual, is underwritten, and conversion or portability rights apply at termination. Industrial life collects small premiums at home; fraternal benefit societies are nonprofit, lodge-based insurers.
Worked example
A client wants permanent coverage, flexible premium timing, and will monitor the policy: universal life fits. A chronically underfunded UL can lapse, and the insurer may raise cost of insurance up to guaranteed maximums.
Traps
Term never builds cash value; convertible does not mean the premium stays level; variable products are securities and require a registered representative.