Life Insurance

Life insurance, strictly speaking, is a legal agreement between the insured and the insurer that a specified amount of money will be paid out to the beneficiary named in the policy upon the event of the death of the insured, provided that the policyholder has kept the policy in good standing. With all of the different types of life insurance policies available in South Carolina, it can become difficult and confusing for the person seeking to purchase a life insurance plan to know what type of policy to purchase. There are a number of decisions to be considered when selecting a life insurance policy: How long will you need the policy? Do you only need temporary coverage or long term? How much should you make the policy for, and how much are you willing to pay in premiums? While there are many other questions to be addressed when choosing a life insurance policy, being familiar with the basics of each main type will make the process a little less complicated.


Temporary Life Insurance

•Term
Term life insurance is perhaps the simplest of life insurance policies, as well as the least expensive. Coverage is provided to the policyholder for a specific amount of time at a fixed rate premium. Unlike with other types of policies, there is no cash value or investment account involved, and the beneficiary named by the policyholder receives the face amount of the contract upon the death of the insured, provided the contract has not expired. For example, a policy purchased with a face amount of $100,000.00, will pay out a benefit of $100,000.00 to the beneficiary. If the life insurance policy expires within the lifetime of the policyholder, the insured will be required to forfeit the policy, renew it, or purchase a new policy. In South Carolina, one back-draw of term life insurance is that premium amounts often increase with the age of the policyholder.


Permanent Life Insurance

•Whole
Whole life insurance is a permanent policy that covers the policyholder for the lifetime of the insured. The company for the insured invests a portion of the premiums paid by the policyholder. The policyholder can choose to borrow against these savings, or simply allow the interest to grow. Whole life insurance policies include a lifetime fixed rate premium that will not increase with the age or health of the insured. Upon the death of the insured, the beneficiary is paid the face value of the policy, as well as any savings that have accrued during its lifetime.


•Universal
Universal life insurance is a more flexible permanent protection plan that allows the policyholder to invest amounts over the minimum premium amount. The insurance company invests portions of the premium, generally into bonds or mortgages, in behalf of the policyholder. The policyholder can borrow or withdraw from the policy, or allow savings to accrue. While a Universal life insurance policy does not allow flexibility in account investments, it does allow for a low-risk cash value account that earns interest rates, while allowing for flexibility in premium payments.


•Variable
A variable life insurance policy is similar to a Universal policy in premium and face amount flexibility. Generally though, a Variable life insurance policy will include a broader selection of investment opportunities for the policyholder.


•Limited-Pay
A limited-pay life insurance policy is a permanent policy that allows the insured to pay all of the required premiums in a specific amount of time. Once the required premium payments have been met, no further premium payments are due for the lifetime of the policy. Limited-pay policies are commonly purchased in paid up to age 65, 10-year, or 20-year plans.