A Life Insurance Introduction

A life insurance policy provides a financial contract between an insurance company and a policyholder. Some of these contracts pay a specific sum of money to the beneficiaries at the policyholder’s death. Others provide a death benefit plus a cash value account that lets the policyholder save money pre-tax.

Two Main Types of Life Insurance

You can find two types of life insurance — whole life and term policies. Ashley Insurance, serving Easton, MD, offers both types. A whole life policy requires the policyholder to pay premiums regularly, whether monthly, quarterly, or semi-annually. One type of whole policy requires only a lump-sum premium payment to fund it.

A term policy provides a death benefit to the beneficiary if the policyholder dies during the term and requires premium payments only during the years of the policy term. These terms typically last for 10, 20, 30, or 40 years. While term policies all essentially work the same way, whole policies include a great deal of variation. 

How Whole Policies Vary

Most whole policies provide only the death benefit, but you can obtain a whole policy with a cash value component. Some of these cash value accounts contribute a portion of the monthly premium, while the other portion goes into a savings account. Some of these savings accounts provide a specific interest rate, while others earn in an investment account. The investment account may use a money market format, or it might link to an index fund.

Once only used by high-income earners, cash value accounts now provide options for those making normal incomes. You can obtain a cash value account with a death benefit of $70,000.

These cash value whole life policies provide a pre-tax method of saving. Many of the policies guarantee a certain interest rate or earnings minimum. You can borrow against them for loans or withdraw from them while you continue to pay the premiums. In some cases, this temporarily reduces the death benefit of the policy. It increases again once the policyholder repays the loan or withdrawals. The whole life policies with cash value accounts include universal life, guaranteed universal, variable universal, and indexed universal.

Contact Ashley Insurance, serving Easton, MD, for more information on life insurance and how to obtain coverage. Let us help you obtain the policy you need to provide for your beneficiaries.