There are two main types of life insurance, cash value and term life. Term life insurance offers protection for a defined period of time, whereas cash value life insurance can provide coverage for an indefinite length of time or for life.¹ The premiums for term life insurance tend to be lower than those for cash value life insurance. Cash value life insurance can sometimes start out to be three to four times more expensive than term life insurance.
Basics of term life insurance
Provides a specific amount of coverage for a specified length of time up to a maximum age.
During the term you select (10, 15, 20, 25 or 30 years), the premiums typically are guaranteed and level and can’t be raised by the insurance company. At the end of the term, the policy either ceases altogether or you can renew it annually at a new premium, which will be higher because you are older.
Term life policy options let you tailor coverage to your needs.
A percentage of the premiums paid into the policy goes into an account where it can earn interest and grow. This account, known as the cash value account, can help pay the higher cost of insuring you in the later years of the policy as you age.
During the life of the policy, you can borrow against the cash value, take partial withdrawals or withdraw the full amount of the cash value when you surrender or cancel the policy.² However, the cash value needs to be maintained at a minimum value for the policy to remain in effect. If premium deductions, loans and withdrawals reduce the cash value account below the minimum value, the policy will expire.
1. Conditions such as paying your premiums, changes in coverage, interest earned, monthly Cost of Insurance charges, loans and partial withdrawals, may affect actual results
2. Please note that withdrawals, outstanding loan balance and loan interest will reduce the face amount of the policy and Death Benefit. Please consider any tax implications.
Charles Schwab & Co., Inc. ("Schwab"), in association with the Small Business Insurance Agency, Inc. ("SBIA") provides customers with access to term life insurance issued by respected insurance companies. Schwab and SBIA are licensed insurance agencies.
The term life products available are underwritten and issued by the participating life insurance companies listed on this Web site. Not all policies and product features are available in all states. This is not an offer or solicitation in any jurisdiction where the policies are not approved for sale. Any obligations under the policies are the exclusive obligations of the insurance company and are subject to the financial condition of the insurance company.
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