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Thanks for the opportunity to explain how insurance products work.
Term: Term is designed to cover a person for a specific time with the lowest premium possible. It may continue after that specific time but the premium will increase. It is designed for an early death. It has NO accumulation of cash values, so whatever premiums are paid are gone when the policy is canceled.
Universal Life (U.L.): U.L. is a product designed to give the insured person level premiums their entire life. It bases the premiums on the current economic conditions and the current life expectancies. These factors can change, therefore the policy is not guaranteed, but is an educated guess using past experiences. More premiums are needed than term insurance to make this product last an entire lifetime, but this develops a nice feature in that it allows a build up of cash value. Unlike "term insurance", when all the premiums that have been paid over 20 years are added up and compared to the cash value, the cash value will be greater than premiums paid. Two nice things are possible:
1. If the policy is continued the premiums stay the same.
2. If the policy were canceled at the end of 20 years the cash value would be enough to pay back all premiums paid.
Whole Life (W.L.): W.L. is a product that is designed to guarantee premiums (they cannot be increased) and death benefit (it cannot be reduced). To achieve this the company uses the worst-case scenario on interest rates and the worst-case scenario on mortality factors. This makes the premiums very high, but if the economy and mortality stay similar to today's factors, the policy creates a large accumulation of death benefit and cash value that could supplement retirement nicely.
Please contact us for an illustration on how each product works.
Fielder Insurance |
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