There are many different variables to insurance policies. Below are some of the more common types.
Term life insurance:
Is the most basic, and often least expensive, form of life insurance for people under age 50. A term policy is written for a specific period of time, typically 1 to 10 years, and may be renewable at the end of each term. Also, the premiums will likely increase at the end of each term and can become prohibitively expensive for older individuals.
Whole life insurance:
Combines permanent protection with a savings component. As long as you continue to pay the premiums, you are able to lock in coverage at a level premium rate. Part of that premium accrues as cash value. As the policy gains value, you may be able to borrow a portion of your policy's cash value tax free, although loans accrue interest and reduce the policy's death benefit and cash value, and may trigger a taxable event if the policy lapses.
Universal life insurance:
Is similar to whole life with the added benefit of potentially higher earnings on the savings component. Universal life policies are also more flexible in regard to premiums and face value. Premiums may be increased, decreased, or deferred, and cash values can be withdrawn. You may also have the option to change the amount you are insured for, known as the face amount. Universal life policies typically offer a guaranteed* return on cash value. Premiums may be increased, decreased, or deferred, and cash values can be withdrawn.1
Variable life insurance:
Generally offers fixed premiums and the ability to invest your cash value in a choice of stock, bond, or money market-based investment options offered by your insurer. Cash values and death benefits can rise and fall based on the performance of your investment choices.
Although death benefits usually have a floor, there is no guarantee on cash values. Fees for these policies may be higher than for universal life, and investment options may be volatile. These investment options are subject to market risk including loss of principal.
On the plus side, capital gains and other investment earnings accrue tax-deferred as long as the funds remain invested in the insurance contract.**
* All guarantees are backed by the claims paying ability of the issuing company.
** Variable investment options within variable life insurance policies are subject to fluctuation in value and market risk, including the possibility of loss of principal. Variable life insurance policies are sold by prospectus. Please consider the charges, risks, expenses and investment objectives carefully before purchasing a variable annuity contract. For a prospectus containing this and other information, please ask your AXA Advisors Financial Professional. Read it and consider the information carefully before purchasing a policy.
1Withdrawals from life insurance policies may be subject to fees, penalties, and income taxes depending on the specific life insurance policy and the policyholder’s tax situation. Withdrawals reduce the policy value and death benefit.
Life insurance contains exclusions, limitations, and terms for keeping it in force. For costs and complete details contact a financial professional.
This information is provided for informational purposes only. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.
Please be advised that this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor.
Please consider the charges, risks, expenses, and investment objectives carefully before purchasing a variable life insurance. For a prospectus containing this and other information, please contact a financial professional. Read it carefully before you invest or send money.
AXA Equitable Life Insurance Company (New York, NY) issues life insurance and annuity products. Securities offered through AXA Advisors, LLC, member FINRA, SIPC. AXA Equitable Life Insurance Company and AXA Advisors are affiliated and do not provide tax or legal advice.