Life Insurance
The foundation of any strong financial plan is protection.
New to buying life insurance? Learn how it works and what you need to understand to choose your coverage.
A life insurance policy is a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death.
Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as Whole and Indexed Universal life, provides lifetime coverage. It’s important to note that death benefits from all types of life insurance are generally income tax-free.
There are many varieties of life insurance. Some of the more common types are discussed below.
Term Life Insurance
Term Life Insurance is designed to provide financial protection for a specific period of time, such as 10,20, or 30 years. With traditional term insurance, the premium payment amount stays the same for the coverage period you select. After that period, policies may offer continued coverage, usually at a substantially higher premium payment rate. Term life insurance is generally less expensive than permanent life insurance. So it is ideal when needing a higher amount while keeping to a tighter budget
Needs it helps meet: Term life insurance proceeds can be used to replace lost potential income during working years. This can provide a safety net for your beneficiaries and can also help ensure the family’s financial goals will still be met—goals like paying off a mortgage, ensuring there is enough financial backing while children are still in the home, and paying for college.
Whole Life Insurance
Whole Life Insurance is a type of permanent life insurance designed to provide lifetime coverage. Unlike term, whole life is designed to cover you for your lifetime. Because of the lifetime coverage period, the whole life usually has higher premium payments than the term life. Policy premium payments are typically fixed, and, unlike term, whole life has a cash value, which functions as a savings component and may accumulate tax-deferred over time.
Needs it helps meet: Whole life can be used as an estate planning tool to help preserve the wealth you plan to transfer to your beneficiaries.
Indexed Universal Life Insurance
Indexed Universal Life (IUL) Insurance is a type of permanent life insurance designed to provide lifetime coverage. Unlike whole life insurance, indexed universal life insurance policies are flexible and, as your needs change, your policy can change, too. You can change the death benefit, increase or decrease your premiums, and add options or riders to fit your needs. An indexed universal life insurance policy's credit interest is based partly on the upward movement of a major stock market index, so when the market does well, so do you. Over the life of the policy, this could mean more cash value and more supplemental retirement income.
Living Benefits
Based on the product, living benefits can provide benefits should a qualifying terminal, chronic, or critical illness or critical injury occur. These Living Benefit Riders(LBR) are additional, typically at no extra charge, riders, where a part of your death benefit can be accessed to help ease the financial stress if one of these conditions occurs. This means Life Insurance no longer only means a death benefit, but also a fighting chance to live.
Needs it helps meet: Replacing Income and relieving financial stress from not only current bills but newly acquired medical bills when qualifying conditions are met.
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