Term life insurance is a contract that specifies that, in exchange for a premium, the life insurance company promises to pay a death benefit if the life insured dies within the fixed term of the contract. The “term” is the period of time during which the coverage is guaranteed to remain in place, as long as the policy’s premiums are paid.

Permanent life insurance provides coverage over the entire lifetime of the life insured. It does not expire (as long as the required premiums are paid), and it does not need to be renewed.

Whole life insurance provides coverage for the entire lifetime of the life insured, with a premium that typically remains level over the duration of the contract. A whole life policy builds up a cash surrender value (CSV) over time, and if the policyholder surrenders the policy prior to the death of the life insured, he may be entitled to receive payment of that CSV, less any surrender charges, if applicable.

• Investment returns in WL

The insurance company invests the policy reserve to achieve additional growth. When determining the appropriate premiums for a whole life insurance contract, the life insurance company must make assumptions about the returns it will make on those investments over the duration of the life insurance contract. Stock market history has repeatedly demonstrated that actual investment returns can vary greatly from projections.

• Dividend payment options

Depending on the insurance company and the specific insurance product, the policyholder may have the choice of several dividend payment options. The policyholder usually makes this choice when he first purchases the insurance, but in most cases, he can switch to another option at a later date.

• The most common dividend options are listed and described below:
• Cash
• Premium reduction
• Accumulation;
• Paid-up additions (PUA)
• Term insurance
• Impact on death benefits and cash values

Depending on which payment option the policyholder chooses, participating policy dividends may affect the death benefit and the CSV of the policy (including any additions). For example:

• The paid-up additions (PUA) option may increase both the CSV and the death benefit;
• The accumulation option may increase the death benefit (assuming the policyholder does not withdraw all of the funds in the accumulation account);
• The term insurance option may temporarily increase the death benefit (for the duration of the one-year term only).

Universal life (UL) insurance provides coverage for the entire lifetime of the life insured, but it also includes a savings component that is created through the deposit of excess premiums. Within certain limits, the policyholder can use a UL policy to accumulate savings that are completely sheltered from tax if they form part of the death benefit, or tax-deferred if they are withdrawn prior to death. UL insurance policies are noted for the flexibility they provide the policyholder. UL insurance combines permanent insurance with tax-advantaged investing, within limits. UL insurance is considered to be the most flexible type of life insurance, because the policyholder can modify the policy in various ways in the future.

Universal life insurance is most appropriate for an investment-savvy policyholder who has long-term insurance needs and who is also looking for tax-advantaged investment opportunities.

Leveraging a UL policy can provide a tax-free source of retirement income.

Group life insurance is coverage that is offered by a plan sponsor to a group of people who have some form of common association with that sponsor. The policyholder of a group life insurance plan is the business or organization that enters into a contract with an insurance company to provide life insurance coverage to the members of its group. The policyholder is often referred to as the “plan sponsor.” A group life insurance plan is governed by a master contract between the plan sponsor and the life insurance company. There is no direct contract between the life insured and the insurance company. This means that the plan member has no control over the contract beyond naming the beneficiary and potentially buying additional optional coverage if the plan permits.

A life insurance policy is often the foundation of a business’s succession plan. When a business uses life insurance as the funding vehicle of a buy-sell agreement, the death benefits are used to purchase a deceased partner’s share of the business from their estate. This can help reduce conflict between all parties involved and allow the business to keep running smoothly. When used to fund a one-way buy-sell agreement, the chosen successor can also use the policy’s accumulated cash value as a source of funding for purchase of the company at owner's retirement.