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# Specialized Life Insurance Policies

Using a modified premium plan, an ordinary life insurance policy's premium payments are redistributed. Premiums are lower during the first three- to five years of the policy, usually comparable to the amount that would be paid for a level term policy of the same length of time. After this initial period, the premiums go up so that they're somewhat higher than would normally be paid for an ordinary whole life policy. The advantage of this plan is that it allows a person to purchase permanent insurance at a time when his or her income might otherwise not permit it, and transfers much of the cost to a later time when the policyowner's income can be expected to be higher.

The graded premium plan is similar to the modified plan listed above in that the initial premiums are very low. Like the modified policy, it's also designed to allow the policyowner to purchase a version of whole life insurance without the initial higher cost. However, unlike modified life (which has one increase to a higher, level premium for the remainder of the contract), graded premium plans provide for an annual increase in premium for each of the first five- to ten years of the policy. At the end of this 'stepped' premium period, the premium remains level for the life of the policy.

Both graded premium and modified life policies build cash value, but the amount accumulated is invariably less because of the smaller premium payments. Typically, a graded policy will have very little, if any, cash value during the graded premium period. Multiple protection policies are combinations of whole life and term insurance whereby the amount of protection is higher in the early years of the policy and less in the later years. For example, a multiple protection policyowner's current death benefit might be described as equal to two times the benefit at age 65 (this, of course, would be known as double protection). If the age 65 (and older) benefit is $25,000, then the insured has $50,000 of current protection up to that age. In essence, the additional death benefit prior to age 65 is term insurance.

Pre-need funeral insurance is a type of life insurance used to pay for an insured's funeral at a particular funeral home. In actuality, this type of insurance is simply a contract to provide a pre-planned funeral and cemetery services funded by a life insurance contract. Typically, the funeral home requests that the insured buy a life insurance policy naming the funeral home as the beneficiary. The funeral home is often paid a commission on the sale of the policy as well. The policy purchased may have an increasing face amount so that the funeral will be fully funded even if burial costs increase.

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