Life insurance is a very important investment tool, necessary for individuals and families with assets to protect. If you are considering purchasing a life insurance policy, make sure you are aware of each of your options. Here is a quick list of benefits of each of the three types of insurance. Click here for a more detailed description.
Term Life Insurance
- Affordable. Monthly premiums are considerably less than a whole life policy.
- Flexible. You select the term length and the coverage amount.
- Use when you need it. Can be important for specific needs like a mortgage, business loan, or having dependents planning on attending school in the future.
Whole Life Insurance (Permanent Life Insurance)
- Fixed Premium. A fixed monthly premium for the entire life of the insured. Premium is usually higher than that of a Term policy during the early part of the policy’s life, but that rate becomes more affordable than other policies as the insured ages.
- Cash Value. Whole life policies build up cash value (the accumulation of premiums after allowances for company expenses and claims). Usually grows tax-deferred and can be obtained if the policy is surrendered.
- Fixed Protection. Ensures you are always protected under the policy as long as premiums are paid. Beneficiaries are always aware of the amount they inherit if the insured dies.
Universal Life Insurance
- Flexible. Typically cheaper than Whole life insurance. The death benefit, premiums and cash value are not guaranteed at a certain amount; instead, they remain adjustable at the will of the policyholder.
- Cash Value. Similar to Whole life insurance, but you can have direct cash withdrawal of the cash value.
- Transparent. Allows you to see where every dollar goes by itemizing charges.
Why is Life Insurance Important?
Life Insurance is extremely important to a family because if the primary source of income is suddenly gone, many families could face losing everything. When a loved one is lost, the financial needs of a family are still very much present. The mortgage still has to be paid, payments on loans have to be met, tuition bills are there, and then there are normal everyday living expenses.
If you have provided sufficient life insurance for your spouse and family, their overall financial needs will continue to be met. In addition, many people aren’t aware that life insurance proceeds are Tax Free. Although life insurance sometimes has a negative connotation (i.e. death insurance), it is extremely important to have for the protection of your family and assets.
What type of Life Insurance Do I Need?
Simply stated, you should purchase the most affordable life insurance policy you can find which meets the needs of your family.
We will assist you in searching for and deciding on how much life insurance coverage you should purchase, as well as find you the best life insurance company. In addition, we will advise you as to what type of coverage would best fit your needs. Some of the areas we look at would include your level of annual income, your health, total amount of debt etc. A major recommendation in purchasing the level of life insurance coverage needed is that you purchase at leasy 10 times your annual income. Obviously, this may not always work for you, so we will discuss your personal situation in depth in order to give you the best recommendation for coverage.
Types of Life Insurance
Term Life Insurance
Several levels of term life insurance are available with time periods ranging from 5 to 39 years. Term insurance is often used to meet financial needs which are relevant to certain time periods. Examples of these kinds of time periods are: Mortgages, Loans, College Tuition etc.
Even though term life insurance policies are issued only for specified periods of time, they still can be very useful financial vehicles. Premiums are guaranteed for the period of time that the policy covers, larger face amounts can be purchased for less money, various riders can be added to the policy such as: child riders, disability income protection and Return of Premium Riders. These policies carry conversion options which guarantee that you can convert to a permanent life insurance policy without worrying about any health issues which could deem you uninsurable.
Whole Life Insurance
A Whole Life Insurance policy can provide amounts of coverage which will never end as long as premiums are paid. Premiums remain the same and your level of coverage also stays the same. Whole life policies are classified permanent life insurance and cash value is accumulated over the years. Whole life insurance is more expensive than either term life insurance or Universal Life Insurance.
Universal Life Insurance
Universal Life Insurance is frequently used to secure “Permanent Life Insurance.” This type of policy can provide coverage for as long a period of time or a short a period of time as you need.
Maximum cash values can be built which can help provide additional money at retirement. Or, if you are more interested in simply maintaining permanent coverage for the rest of your life, you can pay a lower premium, but with little or no cash buildup. In general, we can assist you in finding affordable life insurance that will meet you own individual requirements.
Loans may be taken against the cash value of your policy. Keep in mind that cash value is different from death benefits. With many companies, cash value can be taken either as a lump sum or over a period of years. Cash values can be taxable to you according to your tax bracket. In instances where the policy is kept in force until your death, the beneficiaries receive the death benefit and not the cash value. Death benefits will be received tax free. In some cases, you can elect to have your premiums deducted from cash values in lieu of making premium payments. This election could be very helpful in later years enabling you to keep the policy in force.
Regarding retirement, you could purchase a Universal Life Policy and keep it in force during the period when you are raising your family, paying on your mortgage and educating your children. The cash value could grow throughout these years and you could cancel the policy once these debts are no longer present, and draw the cash value either in a lump sum or over a period of years.
Another important feature available in most life insurance policies (Term Life Insurance, Whole Life Insurance & Universal Life Insurance) is the Accelerated Death Benefit. This feature enables you to receive up to 75% of the face value of your policy if you are diagnosed with a terminal illness. This benefit is built in to most life insurance policies and could make the difference in losing ones home or simply maintaining quality of life.
Choosing a Life Insurance Company
It is very important that you choose a life insurance company which is fiscally sound.
Life insurance companies are rated by A.M. Best, Fitch, Moody’s and Standard & Poors. Ratings range from “A to D”. We normally only represent companies carrying “A” Ratings.
It’s our obligation to look after your best interests and that is what we are committed to do.
All life insurance policies have a “Free Look” period which is usually 10 days from the date your policy is delivered to you. The “Free Look” period guarantees that you may cancel your policy during this period and receive a refund of any paid premiums.
Our guarantee to you is this: We will provide you with sound advice, while finding you a life insurance policy capable of providing you with peace of mind for you and your family and the financial security they deserve.