As with other commodities, many external factors have major impacts upon life insurance policy costs and features. Chief among these are the general economy, consumer demographics, and market demand. To maintain competitiveness, insurers must constantly improvise.
- Annual Renewable Term Life (“ART”)
This type of policy features a constant death benefit. Premiums rise as you age to offset the increased likelihood of your demise. For most people, ART policies eventually become cost-prohibitive.
- Level premium term life (“LPT”)
Due to ART policies’ ultimate unaffordability, insurers have tried to strike a better balance between rising premiums and level death benefits. During initial policy term years, LPT premiums are slightly higher than actual insurance costs. This results in the accumulation of a cash reserve that the insurer reinvests. Principal and interest earned thereon are used during later years to maintain premiums at a level rate.
- Whole life/term to age 100
Insurers devised this type of life insurance in response to consumer frustrations over their life insurance expiring before they did. ‘Term to age 100’ policies accumulate cash values that offset much higher costs of future life insurance coverage that never expires. Like other whole life policies, you may access these cash values during your lifetime.
- Variable life insurance
This type of policy is structured to generate higher returns on invested premiums than conventional whole life insurance, yet enhance policyholder control over accumulated cash values. In essence, VLIs are identical to ordinary whole life policies, except the insured may choose which investment vehicles are used for cash value buildup and death benefit increase.
- Single premium life insurance (“SPLI”)
Whole life SPLIs accumulate cash value with a fixed interest rate that is based upon past insurer performance. With variable SPLIs, you may choose how to invest premium excess. Policy death benefits are determined by your age and overall health. Upon your demise, your heirs receive immediate payment without waiting for lengthy probate proceedings.