Life insurance products can be organized into two main categories: Term Insurance (temporary protection) and Permanent Insurance (lifetime coverage with cash value). Understanding these categories is fundamental to matching clients with appropriate coverage.

Term Life Insurance

Overview:
- Provides pure death benefit protection
- Coverage for specific time period (term)
- No cash value accumulation
- Most affordable option
- Premiums increase with age at renewal

Common Term Lengths:
- Annual Renewable Term (ART)
- 10, 15, 20, or 30-year level term
- Term to age 65 or other milestone

Best For:
- Temporary needs (mortgage protection, income replacement)
- Budget-conscious buyers
- Young families needing maximum coverage
- Supplementing permanent insurance

Permanent Life Insurance

Whole Life Insurance
- Guaranteed level premiums for life
- Guaranteed death benefit
- Guaranteed cash value growth
- May pay dividends (participating policies)
- Most predictable and stable

Universal Life Insurance
- Flexible premiums and death benefit
- Cash value earns interest (current rate)
- Adjustable coverage amounts
- Transparency in costs and values
- More flexibility than whole life

Variable Life Insurance
- Fixed premiums
- Cash value invested in separate accounts
- Investment risk borne by policyholder
- Potential for higher returns (and losses)
- Requires securities license to sell

Variable Universal Life (VUL)
- Combines features of universal and variable
- Flexible premiums
- Investment options in separate accounts
- Maximum flexibility and risk
- Requires securities license

Indexed Universal Life (IUL)
- Cash value tied to stock market index
- Downside protection (floor)
- Upside cap on returns
- No direct market investment
- Growing in popularity

Comparison: Term vs Permanent

Feature Term Insurance Permanent Insurance Duration Specific period Lifetime Cash Value None Builds over time Premium Lower initially Higher but level Purpose Temporary needs Lifetime protection Cost Most affordable More expensive Investment None Savings component

Annuities (Reverse Life Insurance)

What is an Annuity?
- Insurance against living too long
- Converts lump sum into income stream
- Guarantees income cannot be outlived
- Opposite purpose of life insurance

Types of Annuities:

By Premium Payment:
- Single Premium: One lump sum payment
- Flexible Premium: Multiple payments over time

By Payout Start:
- Immediate: Payments start within one year
- Deferred: Payments start in future (accumulation phase first)

By Investment Type:
- Fixed: Guaranteed interest rate and payments
- Variable: Invested in separate accounts, payments vary
- Indexed: Returns linked to market index with protections

Specialized Life Insurance Products

Group Life Insurance
- Employer-provided benefit
- No individual underwriting (for basic amounts)
- Usually term coverage
- Often convertible to individual policy

Credit Life Insurance
- Pays off loan if borrower dies
- Decreasing death benefit matches loan balance
- Creditor is beneficiary
- Often overpriced

Final Expense Insurance
- Small permanent policies ($5,000-$25,000)
- Covers funeral and burial costs
- Simplified underwriting
- Aimed at seniors

Key Person Insurance
- Business owns policy on critical employee
- Protects against financial loss from death
- Death benefit to company
- Premium not tax deductible

Choosing the Right Coverage

Consider:
1. Purpose - Temporary need or permanent protection?
2. Budget - How much can be afforded?
3. Risk tolerance - Comfortable with investment risk?
4. Flexibility needs - Need to adjust coverage/premiums?
5. Time horizon - How long is protection needed?
6. Cash value goals - Want savings component?

General Guidelines:
- Term for temporary needs and maximum coverage
- Whole life for guaranteed, predictable protection
- Universal life for flexibility
- Variable products for investment growth potential
- Combination strategies often work best