UNFCU Insurance Center

Did you know there are key differences between term and permanent life insurance?

What is Term Life Insurance?

Term life insurance provides protection for a specific period of time. It pays a benefit only if the insurer is deceased during the term. Some term insurance policies can be renewed when they reach the end of a specific period, which can range anywhere from one to 20 years; however, the premium rates will increase at each renewal date. Many policies require that evidence of insurability be provided at renewal for the applicant to qualify for the lowest available rate.

What is Permanent Life Insurance?

Permanent life insurance provides life-long protection. As long as the insurer pays the necessary premiums, the benefits will remain available. Permanent insurance policies are designed and priced for the insurer to maintain over a long period of time. If you do not intend to keep the policy for the long term, permanent insurance is not the right coverage for you.
Most permanent policies have a feature known as "cash value" or "cash surrender value." This feature, which is not found in most term insurance policies, provides you with the following options:

You can cancel or "surrender" the policy, in total or in part, and receive the cash value as a lump sum of money. If you surrender your policy in the early years, there may be little or no cash value.
If you choose to stop paying premiums, you can use the cash value to continue your current insurance protection for a specific period of time, or use it to provide a lesser amount of coverage.
Usually, you may borrow from the insurance company using the cash value in your life insurance as collateral. Unlike loans from most financial institutions, the loan is not dependent on credit history or other restrictions. Ultimately, however, you must repay any loan with interest, or your beneficiaries will receive a reduced benefit.

The cash value of many life insurance policies may be affected by a company's future experience, including internal expenses and investment earnings. It is important to understand that with all types of permanent policies, the cash value of a policy at maturity is different from its value when you surrender the policy before its maturity. The face amount is the money that will be paid at policy maturity (or when you are deceased).

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