Life insurance is a private contract that allows you to purchase a large death benefit for a small amount of money on a monthly basis (compared to the death benefit). The policy then pays that death benefit when you, as the insured, die. Some companies offer an adjustable life insurance policy that blends permanent life insurance with term life insurance. Northwestern Life insurance company calls this an adjustable "CL" or "CompLife."
The benefit of an adjustable CL life insurance policy is that you can own a blend of term insurance, which is inexpensive, and permanent life insurance, which offers permanent life insurance protection, all in one policy design. This allows you to design a life insurance policy that fits your needs so that you don't need to make a commitment to buying a large permanent life insurance policy.
The policy features a blend of term life insurance that can be converted to permanent life insurance over time. This is generally accomplished by buying a permanent life insurance policy with an additional convertible term life insurance rider. The term policy can be converted at any time throughout the life of the policy by notifying the company. The premiums will rise as the term policy is converted to permanent.
CompLife, or CL, policies can be purchased with death benefit amounts similar to any other life insurance. Normally, the insurance company will require that these adjustable insurance policies be purchased with a minimum face amount of $25,000 of permanent life insurance.
A common misconception when buying any flexible or convertible life insurance policy is that the premiums will remain level over time. This is not always true. Some insurance companies use an annual renewable term life insurance component for the term life insurance portion of the contract to encourage individuals to convert their term to permanent policies as the policy gets older.
Before purchasing a convertible-type policy, similar to a CL policy, you need to understand your life insurance needs. If you have an increasing need for permanent life insurance, but cannot afford the premium cost of permanent life insurance right now, the convertible insurance policy allows you to "ease" into a permanent life insurance policy over time by converting term to permanent insurance using a permanent life insurance policy as the base policy.
- "Practicing Financial Planning for Professionals, practitioner's 10th edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
- Life & Health Insurance, License Exam Manual, 6th Edition; Dearborn Financial; 2004
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