What is Life Insurance?
Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person.
What is the purpose of Life Insurance?
Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage.
It’s important to note that death benefits from all types of life insurance are generally income tax-free.
There are many varieties of life insurance. Some of the more common types are discussed below.
Term life insurance
Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person.
What is the purpose of Life Insurance?
Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage.
It’s important to note that death benefits from all types of life insurance are generally income tax-free.
There are many varieties of life insurance. Some of the more common types are discussed below.
Comparing Types of Life Insurance
| Term Life Insurance | Universal Life Insurance | Whole Life Insurance | |
|---|---|---|---|
| Needs it helps meet | Income replacement during working years | Wealth transfer, income protection and some designs focus on tax-deferred wealth accumulation | Wealth transfer, preservation and, tax-deferred wealth accumulation |
| Protection period | Designed for a specific period (usually a number of years) | Flexible; generally, for a lifetime | For a lifetime |
| Cost Differences | Typically less expensive than permanent | Generally more expensive than term | Generally more expensive than term |
| Premiums | Typically fixed | Flexible | Typically fixed |
| Proceeds paid to beneficiaries | Yes, generally income tax-free | Yes, generally income tax-free | Yes, generally income tax-free |
| Investment Options | No | No | No |
| May help build equity | No | Yes | Yes |
| Available through Fidelity | Yes, Fidelity Term Life Insurance | Yes, Universal Life Insurance, primarily focused on death benefit protection | No, traditional Whole Life Insurance is not currently offered |
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