Individual Life Insurance
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Providing coverage for a specific period, Term Life offers economical life insurance coverage. This product is also referred to as ‘pure’ life insurance, as it has no value outside the guaranteed death benefit. Once the term expires, it can either be renewed for an additional term, converted to a permanent policy, or allowed to terminate.
Premiums are based on the policy payout amount as well as the age, gender, and health of the insured. In some instances, a medical exam may be required.
The face value of the policy is paid to named beneficiaries upon the death of the insured. This cash benefit (in most cases) is not taxable. If the policy term is reached before the death of the insured, there is no payout. A term policy may be renewed at expiration, but it is important to remember that premiums will be recalculated at the insured’s current age. It’s also important to note that there is no savings component built into a term life insurance policy.
Whole life insurance provides coverage for the life of the insured. It contains a savings component that can accumulate cash value in addition to the stated death benefit. These policies are generally referred to as ‘permanent’ life insurance.
The cash value can be accessed by the policyholder through withdrawals or borrowing against the cash value. The premiums remain the same throughout the life of the policy. A policyholder can make payments above the required premiums to build cash value. These cash values can become a living benefit. He or she may request a withdrawal of funds or borrow against them and make payments with interest. Unpaid loans reduce the death benefits by the outstanding amount. Withdrawals reduce the cash value but do not reduce the death benefit.
Universal Life (UL) insurance offers an investment savings element and low premiums similar to term life insurance. Most contain a flexible premium option, but some do require a single lump-sum premium or scheduled fixed premiums. UL policies offer flexibility that you won’t find with whole life insurance. Premiums and death benefits can be adjusted throughout the life of the policy (with a few restrictions). It’s important for policyholders to pay attention to the rising cost of insurance as they age, as credited interest may not create enough cash value to keep the policy in force, requiring higher premiums in later years.