Blended life insurance basics
Life insurance comes in many varieties, but the two primary ones are term life insurance and permanent life insurance.
Term life costs less than permanent and covers you for a certain period of time. A married couple with young children may take out a 20-year term life insurance policy to pay college tuition for their children in the event of their deaths.
Permanent life insurance doesn't expire, but is intended to last your entire life. It could be used, for example, to provide for a child with special needs after the death of the parents.
A blended life insurance policy starts out as a combination of term and permanent. Let's say you need $500,000 in coverage. The policy can be designed so you have $250,000 worth of term insurance and $250,000 of permanent life insurance.
Each year, the amount of term will decrease and the amount of permanent will increase until eventually the policy will include only permanent coverage, says Scott Witt, an actuary and fee-only insurance adviser at Witt Actuarial Services in New Berlin, Wisconsin.