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Life Insurance 101

Ellie Kay


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Author Ellie Kay, a former insurance broker, gives sound advice so you can make the best decision when selecting your life insurance policy.

Level Term

Advantages: Level payments over specific period, usually 5, 10, 15, or 20 years; may be convertible to a permanent policy
Disadvantages: More expensive than ART in early years, less expensive in later years

Whole Life (permanent)
Advantages: Fixed premiums; cash value you can borrow against; possible dividends; tax-deferred earnings; guaranteed death benefits
Disadvantages: Initially higher premium than term insurance; little flexibility in premium payments

Universal Life (permanent)
Advantages: Flexible premiums; tax-deferred earnings on cash value; access funds; different options allow cash buildup or insurance protection
Disadvantages: If interest rates fall, low cash value buildup may cause policy to lapse unless you add money.

Variable Life (permanent)
Advantages: Fixed, level premiums; guaranteed death benefit; choice of investment options
Disadvantages: Premiums start low but rise with each new term; nothing back if you outlive contract

Annual Renewable Term

Advantages: Most coverage for the least money; protection in increments of one year; can renew yearly up to specified age (usually 70); may be convertible to permanent policy
Disadvantages: Potentially higher earnings than other cash value policies but also greater risk

Variable Universal Life (permanent)
Advantages: Similar to variable life but with flexible payments
Disadvantages: You select the investment vehicle that generates your cash value growth (stocks, bonds, etc.), so there’s greater risk.

For Military:  SGLI (Servicemembers’ Group Life Insurance)
Advantages:  Can be purchased in $10,000 increments up to $250,000.  Essentially a term policy that is VERY affordable—currently SGLI premiums are currently $.065 per $1,000 of insurance, regardless of the member's age.
Disadvantages: If you separate from the military without the benefit of a retirement, you no longer qualify for this policy.


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About The Author


Ellie Kay is a best-selling author, a frequent media guest on Fox News, CNN, and CNBC and a commentator for “Money Matters” radio show. For her free newsletter and money savings links, go to