Selecting the Right Life Insurance

Do I Need Life Insurance?

Are others dependent upon you for financial support? If your children, spouse, other loved ones or even your business had to continue without you, would there be ample income to do so?

An essential part of financial planning, life insurance can help replace income that would be lost upon your death. It can also help ensure that dependents are not burdened with significant debt, affording them financial security in a difficult time. It can provide a cash infusion to your business to meet ongoing business expenses and obligations.

How Much Life Insurance Do I Need?

Your financial advisor can assist you in determining how much insurance you may need. Some factors for consideration include:

  • Immediate expenses such as hospital bills, funeral costs and estate taxes
  • Funds for the readjustment period, enabling loved ones to move or find a job
  • Short- and long-term financial needs such as monthly bills, college tuition or retirement
  • Business expenses including the funding of the business succession plan
  • Indemnifying the company for the loss of a key employee

What Type of Policy Is Best for My Situation?

It is usually best to begin by comparing different types of policies. Although nothing can replace the advice of a financial advisor when making the final decision, this table can be a helpful starting point.


Term Life

Whole Life

Fixed Universal Life

Variable Life

Policy term Stated in policy Life Life or term of years Life or term of years
Type of death benefit Face value Face value (dividends) Face value and/or face + cash value Face value and/or face + cash value
Cash value None Fixed rate, guaranteed Current rate, guaranteed minimum Variable rate, not guaranteed
Investment choice N/A No No Yes
Regulatory agency Insurance Insurance Insurance Insurance and securities

Term Life Insurance

If you’re looking for protection during a specific time period at a reasonable price, consider term life insurance.

  • Protection is limited to a specified and finite period of time, usually between one and 30 years, depending on your age when the policy is purchased.
  • Death benefits are paid only if death occurs during the period covered by the policy.
  • Coverage ceases when premiums are not paid.
  • Policy costs less than other types of insurance, but provides equal protection.
  • It provides the largest immediate coverage per dollar since it lasts only for a specific period of time.

You may have two additional options available when purchasing term life insurance: renewable and convertible policies.

Renewable Term Life Insurance

Under this type of policy, the policy owner does not need to provide evidence of insurability to renew the policy. Premiums may increase, however, at time of renewal.

Convertible Term Life Insurance

Convertible term life policies can be exchanged for whole life, universal or variable life insurance policies. Policyholders do not need to provide evidence of insurability, but premiums will increase since you are moving from a term to a permanent policy.

Whole Life Insurance

As its name suggests, a whole life policy remains in effect your entire life. It differs from term insurance in that a portion of the premiums goes into a cash value account.

  • Protection is provided for as long as you live.
  • Death benefit is guaranteed.
  • Cash value grows income tax deferred.
  • Cash value may be borrowed from the policy.
  • Premiums are designed to be level and do not increase as you get older.
  • Insurance proceeds paid to the beneficiary are received income tax free.

Fixed Universal Life Insurance

This policy offers a wide range of choices regarding premium payments, allowing you to choose how much will be paid and when. Universal means flexible.

  • Premiums are flexible and are subject to specified minimums and maximums.
  • The life insurance amount, which is generally free from federal income tax, can be increased or decreased as necessary.
  • Cash value of the policy accumulates, income tax-deferred, at current interest rates.
  • Portions of the cash value, up to cost basis, may be withdrawn without paying income taxes, interest or surrendering the policy. Amounts over the cost basis may be borrowed from the policy similar to the whole life policy.

Variable Universal Life Insurance

Designed for growth, this policy allows you to invest the cash value of the policy into various investment alternatives. This affords cash value the potential to grow at a faster rate than it would in another type of life insurance plan.

  • The insurance amount is designed to be level or increase as the policy cash value increases.
  • Policy cash value fluctuates according to underlying investment performance.
  • Cash value may be invested in sub-accounts containing domestic or international stocks, bonds, real estate and other, more speculative investments.
  • Higher cash values and death benefits may be obtained or lost due to the financial climate and investment performance.
  • Investment earnings are income tax deferred.
  • Portions of the cash value, up to cost basis, may be withdrawn without paying income taxes, interest or surrendering the policy. Amounts over the cost basis may be borrowed from the policy similar to the whole life policy.

For more information on selecting the right policy for you, please contact your financial advisor or, if you are not yet a client, use the Office Locator to find the office(s) nearest you.

Investors should carefully consider the investment objectives, risks, charges and expenses of variable life insurance before purchasing. The prospectus contains this and other information about variable life insurance and its underlying funds. The prospectus is available from your financial advisor and should be read carefully before purchasing a variable universal life insurance policy.

There are fees and charges associated with variable life insurance policies. Charges vary based on the circumstances of the insured life. Surrender charges vary by issue age, risk class and gender. Loans and partial withdrawals will decrease the death benefit and cash value and may be subject to policy limitations and income tax. A 10% federal tax penalty may also apply if the loan or withdrawal is taken prior to age 59½ if the policy is a Modified Endowment Contract. All guarantees, including death benefits, are subject to the claims-paying ability of the issuing insurance company. An investment in variable life insurance involves risk, including possible loss of principal. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than the original investment.