Life Plan Comparison

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Comparison of the Major Types of Life Insurance

	TERM LIFE	WHOLE LIFE	UNIVERSAL LIFE
PREMIUM	Lower initially. Increases with each renewal.	Higher initially than term. Normally does not increase.	Flexible premiums.
PROTECTS FOR	A specified period.	Entire life if you keep the policy.	A flexible time period.
POLICY BENEFITS	Death benefits only.	Death benefits and eventually a cash and loan value.	Flexible death benefits and eventually cash and loan value.
ADVANTAGE TO BUYER	Low outlay. Initially buyer can purchase a larger amount of coverage for a lower premium. Buyer could consider developing outside investment program.	Helps buyer with financial discipline. Generally fixed premium amount. Cash value accumulation. Buyer can take loan against policy.	More flexibility. Takes advantage of current interest rates. Offers the possibility of improved mortality rates (increased life expectancy because of advancements in medicine, which may lower policy costs).
DISADVANTAGES TO BUYER	Premium increases with age. No cash value.	Costly if you surrender early. Usually no cash value for at least three to five years. May not meet short-term needs.	Same as whole life and buyer assumes greater risks due to program flexibility. Low interest rates can affect cash value and premiums.
OPTIONS	May be renewable or convertible to a whole life policy.	May pay dividends. May provide a reduced paid-up policy. Partial cash surrenders permitted.	May pay dividends.Minimum death benefit. Partial cash surrenders permitted.

Individual vs. group policies

As you shop for life insurance, you will find that policies are sold in one of two ways, either as "individual" or "group" coverage. Group policies are most commonly offered through a companys employee benefits plan, although other types of organizations may provide them as well. Individual policies are those purchased by individual consumers directly from an agent or broker. If you purchase a life insurance policy, the type you choose will have implications for price, the amount of coverage you receive, and level of underwriting required.

Individual life insures single or joint lives under a single policy. Accordingly, this type of coverage will afford you the most choice, as you are free to shop among multiple insurers for the policy that best meets your needs. In addition, many insurers are willing to offer an individual policy that includes only the features you need and none that you do not. However, underwriting tends to be strict for individual policies because the insurer's risk is concentrated on each person; the company needs to be careful that it does not sell a disproportionate number of policies to people who will die in the near term. Younger people and those in good health can often obtain the most coverage for their premium dollar through an individual life policy. People who are older or who have high risk factors can expect to pay more. A company may even decline to issue coverage altogether for certain applicants that are deemed a high risk.

Group life insures a group of people under a single contract. Most of these policies are offered by employers as part of an employee benefits plan, although group policies may also be offered as benefit of membership to other types of organizations, such as professional associations, trade unions, churches, fraternal groups, and other similar organizations.

State and federal laws place restrictions on insurers' underwriting criteria for group policies. If you are unable to qualify for an individual policy because of age or health reasons, group life coverage may be a good option. Any organization that sponsors a group life policy must make it available to all members regardless of age or health status. It is against the law to require group members to purchase a policy as a condition of membership. Group life insurance may be sold as term life, whole life, or universal life coverage.