Types of permanent life insurance
InsureWhile Permanent Life Insurance policies are typically more expensive than their “Term Policy” counterparts, they often offer extra advantages, such as a guaranteed minimum death benefit and the ability to accumulate in cash value tax deferred. Here is a brief explanation of some different types of Permanent life insurance.
Whole Life
With Whole Life your premium payments are fixed for the life of your policy. Whole Life offers a guaranteed death benefit, and guaranteed cash value growth, with some additional non-guaranteed cash value growth potential. As long as you pay premiums, your beneficiary will receive the benefit amount upon your death.
Universal Life
Universal Life provides the flexibility of varying the amount of your premium payments and a guaranteed minimum death benefit — as long as your paid premiums can cover it. If you don’t keep up with the minimum payments, your death benefit payment can be reduced or the policy could lapse. This type typically offers lower premiums and more flexibility than Whole Life, but weaker guarantees and cash value growth potential.
Indexed Universal Life
Similar to Universal Life, Indexed Universal Life provides the flexibility of varying the amount of your premium payments and a guaranteed minimum death benefit — with more upside potential. That is because interest credited to the policy is linked to an external index (such as the S&P 500). This interest credited is typically subject to an upside “cap” and downside “floor”. Because of the higher upside potential, premiums may be lower than Universal Life, but come with additional downside risk.
Variable Universal Life
A category of Universal Life, Variable Universal Life, also offers the flexibility of making variable premiums (provided you make the minimum to keep the policy inforce), and a choice of investment subaccounts for potentially greater cash value. This type offers the greatest upside potential, but also the most downside potential, as cash value is based on the performance of the investment subaccounts.
Guaranteed product features are dependent upon minimum premium requirements and the claims-paying ability of the issuer.
Loans and withdrawals will reduce the death benefit and the cash surrender value and may cause the policy to lapse. Lapse or surrender of a policy with a loan may cause the recognition of taxable income. Withdrawals in excess of the cost basis (premiums paid) will be subject to tax and certain withdrawals within the first 15 years may be subject to recapture tax. Additionally, policies classified as modified endowment contracts may be subject to tax when a loan or withdrawal is made. A federal tax penalty of 10% may also apply if the loan or withdrawal is taken prior to age 59 1/2. Cash value available for loans and withdrawals may be more or less than originally invested. Withdrawals are available after the first policy year.
Insurance policies and/or associated riders and features may not be available in all states.
Variable universal life insurance has annual fees and expenses associated with it in addition to life insurance related charges (which differ with the product chosen), including surrender charges and investment management fees. Variable universal life insurance products are long-term contracts and are sold by prospectus. They are subject to market risk due to the underlying sub-accounts and are unsuitable as a short term savings vehicle. The primary purpose of variable universal life insurance is to provide lifetime protection against economic loss due to the death of the insured person. Cash values are not guaranteed if the client is invested in the investment accounts. There are risks associated with each investment option, and the policy may lose value.
Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02116 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595 and securities are offered through John Hancock Distributors LLC through other broker/dealers that have a selling agreement with John Hancock Distributors LLC, 197 Clarendon Street, Boston, MA 02116.
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