Life

Your family is your legacy, securing their financial stability for a life without you is the greatest gift you can leave.

Here at Envision Insurance (located in Troy, Michigan) we have a team of highly trained, licensed insurance professionals ready to help with determining what life insurance policy is most appropriate for you and your family.

Listed below is a brief explanation of various types of life insurance policies to help you gain a better understanding of what your life insurance policy may cover. This list is not comprehensive and determining which policy is right for you and your family’s unique situation should be left to the experts. Call us today with your questions on which coverage is most appropriate for you and ask us for a free quote!

Start saving money today...  

or

Types of Life Insurance:
 

There are several types of life insurance to choose from and deciding which one is right for you and your family can seem to be a daunting task. Some of the most popular types are listed below as well as some frequently asked questions:

  • Term Life

  • Convertible Term Life

  • Whole Life

  • Universal Life / Variable Life

  • Other Types:

    • Burial Insurance

    • No-Exam (Simplified-Issue) Life

    • Guaranteed Issue
       

Frequently Asked Questions:
 

Why do I need life insurance?

Life insurance offers peace of mind by ensuring that your loved ones will be taken care of in the event of your untimely death. Plus, payouts are tax-free.
 

Is my policy through work enough?

Life insurance through your employer (group life policies) are typically not portable, so it won’t come with you if you leave the job (quit, are terminated or looking to retire). Also, the amount is often not enough to meet people’s protection needs.
 

Why should I get coverage now?

Rates tend to go up as you age. Buying a policy when you’re younger lets you lock in a lower rate.
 

What is term life insurance?

“Term” refers to the term of the policy that you choose. If you pass away during the term (usually 10, 20 or 30 years), your beneficiaries receive a cash payout. For more information on term life insurance see “Term Life” below.
 

Why is term life a good option?

With term life insurance, you’re only paying for the years where the need is greatest (when your kids are younger or in college), and it is usually the most affordable type of insurance.

Are there other types of life insurance besides term?

There are other types of insurance for people seeking life-long coverage, but these types tend to be more expensive. For more information on these types of policies see “Whole Life,” “Universal Life” and “Variable Life” below.
 

Which is better, term or whole life insurance?

It’s not possible to say whether term or whole life is better because they are for different purposes. Term life is good for people who want to cover a specific debt or period of time. Whole life is good for someone whose beneficiaries need a financial safety net for the foreseeable future.

 

How much do I need?

This depends on what you want to leave when you’re gone. There are two common methods for calculating the amount of life insurance you need: lump sum and income replacement. 
 

What is a “free-look” period?

“Free look periods” refer to the period of time that is given to a new owner of a life insurance policy (usually a week or two) that allows the policyholder to “back out” of the policy if they are not satisfied.  The consumer, if they wish to cancel their policy, is given a full refund.  In Michigan, there is no legally mandated free look period that life insurers have to abide by.  However, most Michigan insurance companies will still offer a free look period as a company policy.

Term Life

What is a term life insurance policy?

Term life insurance is a policy that pays your beneficiaries a specific amount of money (that you elect) if you were to pass away within a defined time frame.

You choose the death benefit (meaning payout) when you buy the policy; this is also called the “face amount.” And you name the beneficiaries who will get the money. You can change your beneficiaries any time. People who aren’t named as beneficiaries cannot get the money from the life insurer.
 

How long is a term life policy?
 

Typical policy lengths are 5, 10, 15, 20 or 30 years.

There's also “annual renewable” term life; a one-year policy that you can renew year after year.
 

What happens if I outlive my term insurance?
 

If you outlive your term insurance, there is no refund unless you bought a special type of policy called return of premium (ROP) term life. ROP policies are more expensive than standard term life.
 

Can you cash in on a term life policy?
 

You can’t cash in a term life policy because it has no “cash value.” The only way term life pays out is if the insured person dies, or the insured person uses a policy’s accelerated death benefits in the event of a terminal illness.

If you want life insurance that has cash value, consider whole life insurance or certain types of universal life insurance.
 

What are the types of term life insurance available?
 

  • “Level term” is the most common type of term life insurance. It’s called “level” because the premiums remain the same, or level, during the term of the policy.
     

  • “Annual renewable term” is a policy that can be renewed every year, and rates increase each time. It's best for people who need to fill a temporary life insurance gap.
     

  • “Return of premium term” refunds all the premiums you’ve paid if you live past the policy’s term. You'll pay at least 30% more for this feature, according to Trusted Choice, a trade group for agents. Not many of these policies are sold.
     

  • “Decreasing term life” is a policy that gradually decreases the death benefit over the term of the policy.
     

  • “Joint term life” is a policy that insures two lives at once, such as a husband and wife. Depending on financial needs, it can pay out when the first spouse dies or the second.
     

How to buy term life insurance
 

  1. Decide how much life insurance you need. This number is generally the total amount of the financial obligations that you want life insurance to cover, such as a mortgage amount, college tuition and/or your family's living expenses for a certain amount of time.
     

  2. Choose how long you want the policy to last, such as 5, 10, 15, 20 or 30 years. Make sure the term length covers your longest financial obligation. For example, if you have 18 years left on a mortgage, choose 20-year term life.
     

  3. Compare life insurance quotes from at least a few companies (Envision Insurance does the shopping for you). Quotes are free and easy to get after answering questions about yourself and your health.
     

  4. Check the companies' financial strength ratings from A.M. Best or Standard & Poor's. These ratings indicate the ability of the insurer to pay claims, and you want a financially strong company. Most insurers put their ratings on their websites or ask us and we can provide you with this information.

 

Information regarding companies’ financial ratings can be found in the links below:

- Best's financial strength ratings guide 
- S&P insurer financial strength definitions

5. Start an application when you have a good quote and company you like. You might be asked to take a life insurance medical exam, which you can do at home, at work or you can visit a local, participating clinic. The life insurer pays for the medical exam. Note that it can take a month or more for a life insurance application to be processed and issued.

Some companies offer "accelerated underwriting," which shortens this time, especially if you're young and healthy. If you're impatient to get a policy, ask us if you qualify for any accelerated underwriting policies.

 

Advantages and disadvantages of term life insurance
 

Term life insurance can provide essential protection for your family. It is less expensive than other life insurance options.

The downside of term life insurance is that it isn't a permanent life insurance solution. Once the term ends, the coverage ends or the premiums increase dramatically. And, the older you are, the more expensive it gets.

Fortunately, you can convert many term life insurance policies to a permanent insurance product such as whole life insurance, universal life insurance or variable life insurance.  

If you want to purchase another policy after your term ends, you may have to show evidence of good health to purchase continued protection. An annual renewable term policy may not require this, but your premiums may increase each year.

Keep in mind that as your life changes (for example, marriage, birth of a child or a job promotion), so will your life insurance needs. You should weigh any associated costs before making a purchase. Life insurance has fees and charges including costs of insurance that vary based on the insured person's gender, health and age. There are additional charges for riders that customize a policy to fit your individual needs.

Questions to ask about a term life policy before you buy it
 

Does it have an accelerated death benefit? An accelerated death benefit rider lets you access part of the death benefit if you become terminally ill. It's often already included or available for a small cost.
 

Is the policy convertible to whole life? A convertible life insurance policy lets you convert term life to permanent life without showing that you're in good health. You generally have to make the conversion within a specified number of years after buying the policy. While you may not plan to convert the policy to whole life when you buy it, it’s good to know if you have the option in the future.
 

Convertible Term Life
 

A convertible life insurance policy is a term life policy that can be turned into a permanent life policy after you buy it, without “evidence of insurability.” That means you won’t have to answer health questions or take a new life insurance medical exam to convert the policy.

 

Types of permanent life insurance policies include whole life insurance and universal life insurance.

 

Why convert a term life insurance policy?
 

Converting a policy is an option for people who bought term life and later decide they want a policy that will pay out no matter when they die, such as whole life insurance.

The cost of the new permanent policy will usually be based on the rate class used for the original term policy (such as smoking status and health conditions) and the age at which you convert.
 

Life insurance riders you bought with your term life policy may also carry over to the new policy, however, this varies amongst carriers and policies.

 

Is there a deadline for converting term life?
 

A convertible term life policy will outline the deadline for converting it. For example, a certain age might be the deadline, such as age 70. Or the deadline might be a certain number of years after you buy the term life policy, such as within 10 years.

 

A convertible term life policy, for example, can have a conversion deadline of age 70 or a certain specified number of years into the policy -- whichever was earlier. The years can typically depend on the term length, for example:

 

Term Life Policy Length:               Last Policy Year for Conversion:

10                                                        7

15                                                        12

20                                                        15

30                                                        20

 

 

What policies can I convert to?
 

If your term life policy is convertible, you’ll generally be able to choose any type of permanent policy that’s offered by your life insurance company.

This might even include a joint second-to-die survivorship policy, if you provide “evidence of insurability” on the second person. Second-to-die policies typically insure both a husband and wife on one policy and pay out upon the death of both.

 

Converting only part of the policy
 

Some insurers will allow you to do a partial conversion, meaning part of your term life policy is converted to permanent life and the rest remains term life insurance. The two parts must still equal the original face amount of the term life policy.

For example, if you have a $1 million term life policy and convert $300,000 to whole life, the other $700,000 remains term life.

 

Term Life Policy Full Conversion includes converting the entire term life policy to a whole life policy or universal life policy.

 

Term Life Partial Conversion includes converting the term life policy into a whole life policy or universal life policy in addition to keeping a term life policy.

 

 

Whole Life

Whole life insurance is a policy that builds cash value and offers many guarantees. It's a simple way to buy a policy that will last your entire life. Generally, these policies are more expensive then term life insurance policies.

 

How does a whole life policy work?

With a whole life insurance policy, you pay the same amount every year (or every month), and the life insurance company pays a death benefit to your beneficiaries when you pass away. Some policies can become “paid up” after many years, which means you no longer have to make payments.

Here are the main advantages of whole life:

 

Premiums stay the same. There are no surprises with payments.

The policy builds cash value. A portion of your premiums goes into a cash value account. You can take a loan against this amount or withdraw cash.

The investment return on cash value is guaranteed. The cash value grows at a steady rate.

The death benefit is guaranteed. The amount your beneficiaries will receive is guaranteed. But note that the death benefit they get is typically the face amount of the policy, not the face amount plus the cash value. For example, if you have a whole life policy with a face value of $500,000 and it has $12,000 in cash value, your beneficiaries would get $500,000 upon your death.

 

What’s the best whole life insurance?
 

The best whole life insurance will be a policy that’s competitively priced and backed by an insurer with a good financial strength rating.

Life insurance companies usually show their financial strength ratings on their websites or ask us and we can provide you with this information.

 

Information regarding companies’ financial ratings can be found in the links below:

Best's financial strength ratings guide

S&P ratings definitions

 

In addition, you may want to consider adding life insurance riders that add extra coverage features, so the best whole life insurance will include the riders you want.

 

A good policy also usually includes an accelerated death benefit option, so you can tap into the policy’s death benefit if you become terminally or chronically ill. This can be very valuable for paying medical bills or other health-related expenses.

 

These life insurance riders, as well as several others, are discussed below, see “Types of Life Insurance Riders to Consider”.

 

What does whole life insurance cost?
 

The cost of a whole life policy will often depend on your age, sex, health and other factors. You’ll need to get life insurance quote to know exactly what you’ll pay. Allow Envision Insurance to shop the market for you with our insurance carriers and provide you with the most competitive rate.
 

Universal Life and Variable Life

Universal life insurance is a form of insurance that can last your entire life. There are a few varieties of universal life, providing different flexibility and ways to grow (or lose) cash value. It's important to understand the differences.

 

Guaranteed universal life insurance
 

Summary: 

Guaranteed universal life (GUL) insurance can last as long as you live, assuming you make the payments on time. The death benefit amount for your beneficiaries is guaranteed and your premiums don't change. It's the cheapest way to buy life insurance that will pay out no matter when you die.

These policies are sometimes called "no lapse universal life."

This type of policy is for people looking mainly for a death benefit for beneficiaries, at a cheap price, and who don't care about building up cash value.

GUL policies let you select the age up to which your premiums stay the same. The higher the age, the more the policy will cost. If you live past that age, the policy could expire or become so expensive to maintain that it’s unaffordable. Some GUL policies let you select a guarantee up to age 121. If you're healthy and have relatives who lived a long time, choosing age 90, for example, would be risky.
 

What to watch out for:
 

The biggest risk with GUL policies is making a late payment. If you're even one day late, the policy could lapse and you'd forfeit it, losing all premiums already paid in. No matter what life's circumstances bring in the future that affect finances, you need to pay on time. Read the policy closely before you buy to find out the consequences of a late payment. If you're occasionally late with bills, this is not the policy for you.

You typically can't change the death benefit amount with guaranteed universal life insurance, but you often can with other types of universal life.
 

There's generally little or no cash value in a GUL policy. Because, there may be no cash value, there's no "surrender value." If you decide you don't want the policy you may cancel the policy but won't get any money back. If you're looking for a lifelong policy with cash value, consider a whole life policy or other universal life policies.

 

How much does universal life insurance cost?
 

The cost of a universal life policy will often depend on your age, sex, health and other factors. You’ll need to get life insurance quote to know exactly what you’ll pay. Allow Envision Insurance to shop the market for you with our insurance carriers and provide you with the most competitive rate.
 

 

Indexed universal life insurance
 

Summary: 
Indexed universal life (IUL) insurance policies can last your entire life and often let you vary your premiums and death benefit, within certain limits. This kind of policy can give you flexibility in the future.

It builds cash value, and gains are tied to an index such as the Nasdaq 100, Russell 2000, S&P 500 or even a combination. You will likely have a choice of index. While your cash value is calculated using the index, it doesn't mean your cash value is invested in that index, per se. An IUL policy might guarantee that your interest rate will never be less than zero. This number is called the index floor, thus if your index performs poorly, you won't lose cash value.
 

What to watch out for: 

Your policy’s corresponding index could yield great gains, yet your policy’s cash value may not necessarily realize these great gains, as well. Your interest rate will likely be limited by the policy's participation rate and cap:

 

  • The participation rate is the portion of index upside that your policy will realize. For example, if the index goes up 8% and your participation rate is 50%, you'll get credited for 4%.

  • The cap is the maximum interest rate that will be used to calculate your gains.
     

Example of IUL calculation for gains

Index change x participation rate = Interest rate you get, but not higher than the cap or lower than the floor

For example: Your policy has a 50% participation rate with a cap of 3%. Your policy’s corresponding market index performs strongly, and the index grows by 10% on the year. The participation rate alone would mean that your policy should realize a 5% rate of growth (50% of 10%), however, because there is a 3% cap on the policy, the maximum gains on the policy would be 3%.


 

Variable Life / Variable Universal Life Insurance
 

Summary: 
Variable life also known as variable universal life (VUL) insurance policies allow you to vary premium payments and the death benefit, within certain limits. This type of policy is for people who want to build cash value and manage their own investment choices.

Your cash value can be invested in multiple "sub accounts" such as stocks, bonds or money market accounts. There may be an option with a fixed interest rate as well. You can typically access the cash value through policy loans or withdrawals.

If you decide you don't want the policy you can cancel it and take the surrender value, if any. There are typically surrender charges if you cancel your policy in the first several years. The policy will outline the surrender charges.

 

What to watch out for: 

With a VUL policy you select your investments and need to be active in monitoring them. If the underlying investments go down, the policy could lapse (meaning terminate) due to a lack of cash value. In other words, you could lose all your money.

A lot of your premiums could be eaten up by fees and charges, including fund management fees. That means less money toward cash value. Note that depending on your VUL policy, your death benefit can have a direct correlation to the underlying investments they are tied into. Thus, your death benefit can decrease to point of $0 face amount at the time of your passing. As such, you should consider a VUL only if you are able to accept the risk of possibly not having a death benefit at the time of your death.

Sources:

Danise, Amy. (2019, May 6). “Choosing a Life Insurance Beneficiary”. “EverQuote, Inc. Copyright © 2019.
Retrieved from https://www.everquote.com/blog/life-insurance/life-insurance-beneficiary/

 

Danise, Amy. (2019, May 20). “Convertible Term Life Insurance”. “EverQuote, Inc. Copyright © 2019.
Retrieved from https://www.everquote.com/blog/life-insurance/life-insurance-beneficiary/

 

Danise, Amy. (2019, April 22). “How Much Life Insurance Do You Need”. “EverQuote, Inc. Copyright © 2019.
Retrieved from https://www.everquote.com/blog/life-insurance/how-much-life-insurance-do-you-need/

 

Danise, Amy. (2019, May 13). “Should You Buy Guaranteed Issue Life Insurance”. “EverQuote, Inc. Copyright © 2019.
Retrieved from https://www.everquote.com/blog/life-insurance/guaranteed-issue-life-insurance-policies/

 

Danise, Amy. (2019, April 22). “Types of Life Insurance: Which is Best?”. “EverQuote, Inc. Copyright © 2019.
Retrieved from https://www.everquote.com/blog/life-insurance/types-life-insurance/

 

Danise, Amy. (2019, April 23). “What is Term Life Insurance?”. “EverQuote, Inc. Copyright © 2019.
Retrieved from https://www.everquote.com/blog/life-insurance/what-is-term-life-insurance/

 

Danise, Amy. (2019, April 22). “What is Universal Life Insurance?”. “EverQuote, Inc. Copyright © 2019.
Retrieved from https://www.everquote.com/blog/life-insurance/universal-life-insurance/

 

Metz, Jason. (2019, May 22). “7 Life Insurance Riders to Consider”. EverQuote, Inc. Copyright © 2019
Retrieved from https://www.everquote.com/blog/life-insurance/life-insurance-riders/

 

Metz, Jason. (2019, May 6). “Pre-Need Insurance Plans: Pros and Cons”. EverQuote, Inc. Copyright © 2019
Retrieved from https://www.everquote.com/blog/life-insurance/pre-need-insurance/

 

Metz, Jason. (2019, May 21). “The Life Insurance Medical Exam: What Are They Looking For”. EverQuote, Inc. Copyright © 2019
Retrieved from https://www.everquote.com/blog/life-insurance/life-insurance-medical-exam/


Metz, Jason. (2019, May 22). “What is Burial Insurance”. EverQuote, Inc. Copyright © 2019
Retrieved from https://www.everquote.com/blog/life-insurance/burial-insurance/

 

Rockford, Thomas. “Michigan Life Insurance”. Life Ant
Retrieved from https://www.lifeant.com/michigan-life-insurance/

 

 “Term Life Insurance. Nationwide, Inc. © 2019 Nationwide Mutual Insurance Company and Affiliated Companies
Retrieved from https://www.nationwide.com/term-life-insurance.jsp

 

Follow us on:

  • Facebook Social Icon

2019 Envision Insurance Agency: 38221 Mound Rd, Sterling Heights, MI 48310