Life Insurance: Understanding Your Options
Written by: Justin Tomlin, Licensed Insurance Agent in FL & GA
Life insurance serves one purpose: making sure the people you care about are financially protected if something happens to you. The question is which type makes sense for your situation.
My name is Justin, and I'm a licensed insurance agent in Florida and Georgia. Here's what you should know about the main policy types.
Term Life Insurance Policy
Coverage for a specific time period—typically 10, 20, or 30 years. If you die during the term, your beneficiary gets paid. When the term ends, coverage ends (unless you renew or convert).
How it works: You pay the same premium every month or year. At the end of the term, the policy expires.
What to know: No cash value builds up. If you renew after the term ends, expect your premiums to jump significantly. You can convert to permanent coverage, but the details depend on your specific policy. Miss a payment beyond the grace period, and coverage stops.
Whole Life Insurance Policy
Permanent coverage that lasts your entire life—as long as you keep paying premiums.
How it works: Your policy builds guaranteed cash value over time. You pay higher premiums than term because the money goes toward both your death benefit and this growing cash value.
What to know: If you borrow against or withdraw your cash value, it reduces your death benefit and may trigger taxes when you cash out. Some policies earn dividends (bonuses from company profits), but these aren't guaranteed—they depend on how well the insurance company performs. Cancel early and you'll owe surrender charges.
Universal Life (UL) Insurance Policy
More flexible than whole life. You can adjust what you pay in premiums and what your death benefit is (within limits set by the insurance company).
How it works: Like whole life, you build cash value. It earns interest at a rate the company declares. This rate can change year to year, but there's typically a guaranteed minimum (usually 1–3 years).
What to know: The temptation with flexible premiums is to underpay. If you do, your cash value gets eaten up by policy charges and the policy can lapse. There's no guarantee the interest rate will stay high enough to keep your coverage going without extra payments from you. The actual interest credited to your account is less than what's advertised because charges for insurance, administration, and surrender fees get deducted from it. Check your policy for the exact charges and schedule.
Indexed Universal Life (IUL) Insurance Policy
A variation of UL where your interest is tied to a stock market index—usually the S&P 500—instead of being set by the company alone.
How it works: These policies have a "floor" (minimum interest rate, usually 0%) and a "cap" (maximum interest rate, for example 10%). If the market goes up 15% but your cap is 10%, you get 10%. If the market drops 20%, the floor keeps you at 0%—you don't lose money to market drops.
What to know: You're not actually investing in the stock market. You own an insurance policy with a market-linked interest feature. You don't own any stocks or directly participate in market gains beyond the cap. The floor protects you from market losses, but not from policy charges. Charges for insurance, administration, index tracking, and surrender fees get deducted from your account every month. If these charges add up to more than the interest you earn, your cash value can decline—even in years when the market is up. There's no guarantee the interest earned will keep the policy solvent without you adding more money.
Picking the Right One
There's no universal "best" policy. It depends on:
- How much you can afford to pay
- Whether you need coverage temporarily or for life
- Whether you want a policy that builds cash value
- Your comfort with flexibility versus predictability
Questions?
I can walk you through how each policy would work for your situation without any obligation to buy.
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Important
Life insurance is a legal contract. Everything—guarantees, charges, rates, renewability—is in your policy document. Loans and withdrawals from cash value reduce your death benefit, may trigger surrender charges, and could create tax liability.
This is educational information, not personalized financial or tax advice. Review your policy terms carefully and talk to a licensed agent about whether a policy is right for you. If you have questions about taxes or investments, consult a tax accountant or financial advisor.
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Justin Tomlin
Licensed Insurance Agent (FL #W960118; GA #3760385)
Agency: CHL Insurance Solutions, LLC (FL #L131407; GA #241106)
