Understanding Life Insurance
Depending on your needs, there are different life insurance options. While some provide coverage for your lifetime, others provide coverage for a specific number of years.
Your local ERIE Agent can explain the details and help you choose the best fit. ERIE’s life insurance calculator can help determine the amount of life insurance you may need.
Read on to learn more about the two basic types of life insurance: term life and cash value life.
Term Life Insurance
Term insurance provides coverage for a term of one or more years. The 20-year plan is the most popular version. Term insurance pays a death benefit if death occurs during the policy term. It does not include a cash value that can be used in the future.
Most term policies also include an option to convert to a cash value policy without having to provide evidence of insurability. Some restrictions or limitations may apply so check with your Agent to understand how the convertibility option will work for you. The annual premium for term life insurance is usually less during the early years than the premium for a cash value insurance product. Be sure to compare the long-term cost of each product before you buy.
Types of Term Life Insurance
Erie Family Life offers you two choices1:
- Term life insurance – Designed to provide protection for larger face amounts. The face amount of the policy and premiums remain level for the guaranteed level premium period chosen by the policy owner of 10, 15, 20 or 30 years. After the level premium period, the premium increases on an annual basis. Provides coverage to age 95. Select rates are available with a paramedical exam.
- ERIE LifeSenseSM – Makes it easy to get up to $90,000 worth of coverage in about 15 minutes. There’s no medical exam or complicated forms to fill out. In fact, it is a simple application with only a few medical questions. This plan provides 5-, 10-, 15- and 20-year term options (after which the coverage will expire).
Cash Value Life Insurance
Cash value life insurance is designed to last an entire lifetime provided required premiums are paid. Most products provide coverage until age 100 or later. The premium for this type of insurance is higher than term insurance during the early years of the contract. The premium that is not used to cover expenses or the cost of insurance can help build cash value that increases with time. You may borrow against a policy’s cash value by taking a policy loan.
Learn more about Borrowing Against a Cash Value Life Policy.
Types of Cash Value Life Insurance
There are several types of cash value life insurance, including whole life, universal life and variable life.
- Whole life insurance is designed to provide coverage for as long as you live. The annual premium is usually payable for a period of time such as 20 years or to age 100. The premium amount never changes unless there is a change in benefits. The cash value is guaranteed as shown in the policy.
- Universal life insurance is a flexible premium adjustable life insurance product that allows you to select the premium payment within the policy minimum and the IRS maximum. The death benefit can be adjusted higher or lower as defined in the policy without having to buy a new contract. Increases are subject to underwriting approval. The cash value earns interest at a rate determined by the insurer and that rate is subject to fluctuation based on market conditions. Policy may expire if sufficient premiums are not paid. Like whole life, the cash value can be borrowed1. Additionally, the cash value can simply be withdrawn, thereby avoiding interest expense charges, subject to policy limits.
- Variable life insurance can be structured as whole life insurance or as universal life insurance. The distinguishing feature of variable life is that the cash value is dependent on the investment performance of one or more separate accounts. In other words, the policy owner is subject to financial risk and the loss of their cash value. Be sure to read and study the prospectus before buying this type of policy. Erie Family Life does not offer variable life insurance products. For details regarding variable life insurance, consult with a qualified financial professional.
For information on your life insurance policy or the features and benefits of other products that Erie Family Life offers, contact a local Erie Insurance Agent.
1Life insurance and annuity products are not available in New York. Refer to our Disclaimer for additional information.