Whole life
Traditional whole life typically has scheduled level premiums and guaranteed cash values when required premiums are paid. Any illustrated dividends are not guaranteed.
← Life insurance guidanceTerm vs. permanent.
Life insurance made clearer • Palm Beach County
Term vs. permanent.
Protection with a purpose.
Two approaches. Different jobs. Let’s make the choice easier to understand—starting with your people, your timeline, and your budget.
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Start with the job you need done
Same goal. Different tools.
Life insurance helps protect the people who depend on you financially. Ask: “What would need to be paid, and for how long?” A mortgage, a young family, and a lifelong dependent can create different needs.
| What to compare | Term life | Permanent life |
|---|---|---|
| Coverage period | A specified term; review what happens afterward. | Designed to last a lifetime if policy requirements are met. |
| Premium | Usually lower initially for the same death benefit. | Typically higher; guarantees and funding vary by type. |
| Cash value | Generally none. | May build cash value, subject to charges and policy terms. |
| Questions to ask | How long is the level premium? Can I renew or convert? | What is guaranteed? What premium keeps coverage in force? |
Illustration: a parent might explore term coverage for the years a child depends on their income. Someone with a continuing family or legacy need might also explore permanent coverage. These are discussion examples, not recommendations.
Universal life, including IUL
Universal life can offer flexible premiums, but flexibility still requires adequate funding. Indexed universal life (IUL) links interest crediting partly to an index under contract limits; it is not a direct investment in that index. Policy charges still apply.
Less jargon. More “I get it.”
Your life insurance vocabulary.
Premium, insured, owner, and beneficiary
Premium: the payment for coverage. Insured: the person whose life is covered. Owner: the person or entity with policy rights. Beneficiary: who receives the death benefit. These roles do not always belong to the same person.
Death benefit versus cash value
Death benefit: the amount payable after the insured dies, subject to policy terms. Cash value: value inside a permanent policy that may be accessible while living. Do not assume beneficiaries receive both added together; ask how your policy pays.
Level term, renewal, and conversion
Level term: typically keeps the premium and death benefit fixed for a stated period. Renewal: continuing coverage under the policy’s rules, often at a higher premium. Conversion: changing eligible term coverage to permanent coverage without new medical underwriting, within specified deadlines and product choices.
Underwriting and riders
Underwriting: the insurer’s review to decide eligibility and pricing. Rider: a provision that changes or adds benefits. Costs, qualifying events, and limits vary. A living-benefit rider is not automatically comprehensive long-term care coverage. Explore long-term care planning →
Cash surrender value, policy loans, and lapse
Cash surrender value: what is available if you cancel, after applicable charges and outstanding debt. Policy loan: borrowing against cash value; interest accrues and unpaid debt reduces available values and benefits. Lapse: coverage ending when policy requirements are not met.
Illustration: guaranteed versus nonguaranteed
An illustration shows how a proposed or existing policy may work. Separate contractual guarantees from assumptions about interest, dividends, or other changing values. Ask for an in-force illustration when reviewing an existing permanent policy.
Potential advantages. Important conditions.
Tax benefits, without the tall tales.
Life insurance is protection first. Tax treatment is one part of the conversation—not a reason to overlook affordability, charges, or how long coverage is needed.
Death benefits
Life insurance paid because the insured dies is generally excluded from the beneficiary’s federal income. This can apply to term and permanent policies. Interest paid on proceeds is generally taxable; transfers for value and other exceptions can change the result.
Cash value
Growth inside a qualifying permanent policy generally accumulates tax-deferred. That means current tax on internal growth is postponed—not that every payment from the policy is tax-free.
Withdrawals, cancellation, and policy loans
Surrendering a policy can create taxable income when proceeds exceed your adjusted investment in the contract, often called cost basis. Loans and withdrawals need a policy-specific tax review. Do not treat a loan as guaranteed tax-free income, particularly if the policy later lapses or is surrendered with debt outstanding.
What does MEC mean?
A modified endowment contract (MEC) is a tax classification that can result when a life policy fails IRS funding tests. It changes the treatment of distributions, including loans. Before making a large payment or taking money out, ask the insurer whether the policy is a MEC and consult your tax professional.
Are premiums deductible? Is estate tax the same as income tax?
Personal life insurance premiums generally are not deductible; they are not a medical-expense deduction. Income-tax treatment and estate-tax treatment are separate issues. Ownership, beneficiaries, and your circumstances matter. Coordinate estate questions with your attorney and tax professional.
Federal tax overview only. Exceptions and special rules apply. Health Palm Beach does not provide tax or legal advice.
Bring your questions. We’ll bring clarity.
Choose protection you can understand.
For your review, think about who depends on you, what needs funding, how long those needs may last, and a premium you could comfortably maintain. Already insured? Bring the policy and latest statement.
Schedule My Life Insurance Review →Prefer a broader planning starting point? Take My Retirement Snapshot →
Serving Palm Beach County and other locations where licensed. Availability, underwriting, premiums, exclusions, and guarantees depend on the insurer, state, and policy. Guarantees rely on the issuing insurer’s claims-paying ability. Do not cancel existing coverage before replacement coverage is issued, reviewed, and in force.
Reviewed October 24, 2026. Educational resources: NAIC life insurance guide ↗ · Florida life insurance overview ↗ · IRS death-benefit tax rules ↗ · IRS Publication 525 ↗
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