Life Products

Term Life is the simplest type of insurance, providing death benefit only. There is usually no cash value or savings component. Premiums may be renewable at varying rates on a yearly or longer basis, or level for the length of the policy.

Some factors to bear in mind

If you wish to maintain the same amount of coverage year to year and purchase a yearly renewable term policy, expect the premium to increase each year.

If you prefer a level-term policy, your premium will be a constant amount for a set period of time — usually 10 to 20 years. However, it will generally be higher than for a yearly renewable term policy in the initial years of the coverage period and lower in the later years. (For more details, see below.)

When to Use Term Life Insurance

To cover short-term needs — such as a mortgage period, to ensure funds will be there to pay off the mortgage should you die.

To address large life insurance needs — where the cost of providing the desired coverage through other, more sophisticated, types of policies may be unmanageable.

The Basic Types of Term Life Insurance

Yearly Renewable Term (YRT)
As implied, every year, your premium increases, but the amount of coverage — the death benefit — remains the same. The reason is that as you age, so does your mortality rate, but there is no investment or savings element to possibly mitigate the cost. By the same token, the absence of a savings element explains why the premiums are generally lower than for any other form of insurance; you pay purely for protection. YRT usually becomes prohibitively expensive at older ages.

Level-Premium Term
The premiums remain level for a specified period — usually 5, 10, 15 or more years. At the end of the level premium period, your premiums will increase — either for a one-year period, or for another specified duration. At that point, you may have to re-qualify for coverage by providing proof of eligibility — an important factor to consider in deciding which policy is right for you.

Decreasing Term
With this policy, your death benefit decreases every year, but the premium remains level. In effect, you pay less for more protection in the early years, when you may be cash-short, and more in later years, when cash reserves may be greater. It's the form most often used to help cover a mortgage, because the decrease in the death benefit roughly parallels the reduction in the outstanding mortgage. A wide range of protection periods is available.

* All guarantees are based on the claims-paying ability of the issuing company.

Universal Life

With so many type of life insurance policies available to support a variety of needs, it is important to understand a policy's particular benefits and limitations. Universal Life Insurance, also know as flexible premium adjustable life insurance, is one of the most versatile types of life insurance. Across the board, universal life policies are flexible because their components can be "unbundled" or separated; some policies focus on competitive premiums and added features like cash value accumulation, while others focus on lower premiums and fewer features. This spectrum makes universal life insurance a popular choice among insurance consumers.

Features of a permanent life insurance policy

Permanent life insurance provides many features that, when combined, create a valuable financial tool. Some of the features include:

• Non-taxable death benefits
Death proceeds are generally free from income tax, making it possible to ultimately provide more benefits to your beneficiaries.

• Proceeds direct to beneficiaries
You can designate that death proceeds be paid directly to your beneficiaries, making it possible to avoid probate delays. And many states have enacted laws that make
life insurance safe from creditors, also.

• Tax-deferred growth
A portion of each premium payment goes into the “policy value” which is the part of the policy that earns interest. This interest accumulates on a tax-deferred basis.

• Access to policy value
Cash surrender value can provide a source of funds for the policyowner through loans with low interest rate spreads and/or a partial surrender. Either choice will affect the death benefit amount, policy value, and taxation. Discuss the tax risks with your tax advisor.

Features unique to universal life insurance

Universal life insurance is designed to offer many of the same benefits of traditional permanent insurance plans — plus more.

Some of the features include:

• Flexible premiums
Instead of being locked into a fixed premium schedule for life, a universal life policy gives you a great amount of premium flexibility. You can potentially pay any amount between the required plan “minimum” to an IRS-imposed “maximum,” depending upon your cash flow needs and accumulation goals.
Premiums may be increased, decreased, or even skipped, depending on such factors as past premiums, policy surrender values, loans, and interest rates. Please refer to number 5 in the Questions section.

• Adjustable death benefit
The death benefit amount may be adjusted, within the plan limits, without having to buy a new, separate policy. This can reduce costs and simplify the process of changing your coverage. Please refer to number 4 in the Questions section.

• Current interest credits
Unloaned policy values are credited with a current rate of interest that may be changed by the Company to reflect the current economic climate. While this rate will never fall below the contractually guaranteed minimum, it is designed to make universal life a competitive insurance value. Please refer to number 8 in the Questions section.

• Death benefit options
Protective universal life plans feature two distinct death benefit options. Under the Level Death Benefit option, the death benefit is equal to the face amount. Under the Increasing Death Benefit option, the death benefit is equal to the face amount plus the policy value.

• Current cost of insurance
This is the charge for the insurance death benefit based on the amount at risk and is deducted each month from the policy value. The cost of insurance rate is based on the insured's age, gender, underwriting classification, and the number of years the policy has been in force. The current rate scale will never exceed the guaranteed rate scale in the policy contract. Please refer to numbers 6 and 7 in the Questions section.

Universal Life Insurance
The premiums of a universal life insurance policy are split in two ways. The premium you pay goes toward covering the cost of the insurance policy and the remaining balance is invested and earns interest on a tax deferred basis. With this type of life insurance you also receive a guaranteed minimum interest rate on the balance that is invested.

Variable Life Insurance
Variable life insurance is an investment-oriented whole life insurance policy that provides a return linked to an underlying portfolio of securities. The portfolio is a group of mutual funds including common stocks, bond funds, and money market funds. This type of life insurance offers fixed premiums and a minimum death benefit. The better the total return on the investment portfolio, the higher the death benefit or value of the variable life policy.

Variable Universal Life Insurance
Variable universal life insurance is a combination of universal life insurance and variable life insurance in that excess interest credited to the cash value account depends on investment results of separate accounts (equities, bonds, real estate, etc.). You have a choice as to how the cash value is invested -- stock and bond mutual funds. However, there is no guaranteed minimum interest rate with a universal life insurance policy.

Survivorship Universal Life Insurance
Survivorship universal life insurance provides a policy in which two people are covered on one policy. The death benefit is paid upon the second death. The premiums for this joint life policy are significantly lower than a regular policy. Many people take this type of life insurance to help pay estate taxes after the deaths of both a husband and wife.

• Annual report to policyowner
All monthly deductions, interest credits, death benefit amounts, loans/withdrawals, cash values, policy values, and premiums received are documented in an annual report Protective sends to policyowners each year. This report includes the important information about the continuation of the policy into the future. The annual report should be reviewed each year to make sure the policy continues to meet the policyowner’s needs. Adjustments may be appropriate based on changed conditions, interest credits, or monthly deductions.

Whole Life Insurance

A whole life insurance policy remains in full force and effect for the life of the insured, with premium payments being made for the same period. Some whole life policies let you pay premiums for a shorter period such as 20 years, or until age 65. Premiums for these policies are higher since the premium payments are made during a shorter period of time.

One of the major appeals of "Whole Life" insurance is that it guarantees a minimum death benefit (also known as the face amount), no matter how long you live, as long as premium payments are made. What's more, the premiums you pay contribute to building a guaranteed minimum cash value, which can be used in several ways. It can be borrowed against or withdrawn. If you decide to close out the policy, for whatever reason, you can take the accumulated cash or use it to purchase other insurance protection. If left untouched, the cash value will increase each year to the point when it "endows" - becomes payable to you. Another attractive feature of Whole Life is that the premium is fixed and guaranteed to remain the same for the life of the insured.
All this — and dividends, too!

Yes, it is possible for certain types of Whole Life insurance to pay dividends to the policy owner. This can occur because the premiums for these types of policies are calculated using conservative assumptions about the mortality and expected return on investment. If the insurance company's actual experience proves to be more favorable — with higher returns than assumed — a surplus can arise. The insurance company may then decide to distribute some of this surplus to policy owners, as dividends. Remember, though, that possible dividends are dependent on many investment factors, and aren't guaranteed. As the policy owner, you can choose to use these dividends to either:

reduce policy premiums, loan interest, or loan principal
purchase additional insurance to increase the existing death benefit and its associated cash value, which can be surrendered or borrowed against, just as with the base policy
take them in cash or leave them on deposit with interest

Advantages

It guarantees a level premium, minimum cash value and minimum death benefit.
Its built-in discipline (pay the premiums when due or the policy will lapse) eliminaes the temptation to skip premium payments, which could result in future funding problems.
The fixed premium enables you to plan cash-flow outlays accurately.

Disadvantages

Conservative assumptions with respect to earnings and expenses means its guaranteed premiums are higher compared with the non-quaranteed premium of a Universal Life or Variable Universal Life policy.
You have much less flexibility with respect to premium amount and payment schedule than with Universal Life or Variable Universal Life.
It doesn't allow you to increase or decrease the face amount of the policy. If you need additional coverage, you must purchase another policy, which may result in additional acquisition costs to you and may require evidence of insurability.
With no investment options, you will have no investment flexibility.
Generally, an insurance company will invest whole life premiums in bonds and mortgages. Historically, bonds and mortgages have had limited growth potential. Of course, past performance is not indicative of future results.

* All guarantees are based on the claims-paying ability of the issuing company.