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Life
insurance may have one or two primary features - protection in the form of
a death benefit and tax-deferred cash value buildup.
Traditional Life Insurance
Term Life insurance provides protection for a specified period of time.
It has no cash value but carries lower premiums. (Can be purchased with
options
to convert to permanent life.)
Whole Life provides cash value, a portion
is guaranteed by the insurance company.
Universal Life policy cash
value buildup
is tied to interest rate performance.
Survivorship Life insures two
lives and is suited for paying estate taxes on death of the second spouse.
Variable Life Insurance
Cash value is invested among a variety of sub accounts allowing for more
potential growth than traditional life insurance policies. There is a tax
advantage in that the earnings are not subject to federal income taxes
while they remain in the policy. Access to cash value is available through
tax-free loans. Loans and withdrawals do, however, reduce the death benefit
and cash value of the policy by the amount of any outstanding loan and/or
any interest owed. Beneficiaries receive death benefit free of federal
income taxes. However, cash value of a variable life insurance contract
is not guaranteed. Variable Life offers permanent protection.
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