Insurance

 

Life Insurance

As a general rule, we believe most individuals should “Purchase Term Life Insurance and Invest the Rest.”  We’ve found that many clients do not fully understand the benefits and drawbacks of different life insurance policies.

 

Why do I need life insurance?

When a life is lost, the quality of life dreams of the individual’s family should not die, as well.  Life insurance typically is used to replace the income earned by an individual, pay off the mortgage, pay off debt, pay final burial expenses and provide for children’s education.

 

How much life insurance do I need?

Complete the attached Life Insurance Coverage Estimation Sheet to estimate the proper amount of coverage for your family.

 

What are the different types of life insurance policies?

 

Term Insurance

Term insurance is usually recommended if your family needs financial protection for a specific period of time, whether it's one, five, 10 or even 30 years. Term insurance helps cover needs that will disappear over time, such as a mortgage or college expenses. It also is recommended for families that need a large amount of life insurance protection and are on a limited budget, since term insurance premiums can be less expensive than other types of life insurance.

Features:

·          Provides protection for a specific period of time, usually anywhere from one to 30 years.

·          Pays a death benefit to your beneficiary only if you die during the specified term. At the end of the term, protection ends unless the policy is renewed.

·          Your beneficiary will not have to pay federal income taxes on the death benefit.

·          Premiums are generally lower for term insurance than for permanent insurance. However, premiums for term insurance will increase as you grow older.

Permanent Insurance

Permanent insurance is a combination of an insurance product (term insurance) and an investment.  As long as you pay the premiums, your beneficiary will receive the death benefit.  Permanent life insurance also builds up a cash value, which you can borrow against and use during your lifetime.

Features:

·          Premiums for permanent insurance can be fixed or flexible to meet your personal financial needs.

·          Your beneficiary will not owe federal income taxes on the death benefit.

·          You have access the cash value of a permanent insurance policy, which increases over time tax-deferred.

·          You can borrow against the policy's cash value to help pay college expenses, pay the policy's premiums, or provide paid-up insurance. Be aware that policy loans reduce the death benefit and may leave your beneficiary without adequate protection.

·          You can convert the cash value of permanent insurance into an annuity, which can provide you with an income for life.

·          You can cancel the policy and use its accumulated cash value any way you wish. You may owe taxes on some of the cash value if the sum exceeds what you have paid in premiums.

There are different types of permanent life policies:

 Whole or ordinary life is the most common type of permanent insurance. The premiums and death benefit generally remain constant over the life of the policy.

 Universal or adjustable life offers you flexibility in both premium payments and the death benefit your family receives. You can adjust the death benefit and your premium payments, within certain limits, to fit your financial situation.

 Variable life policies have a value tied to the performance of financial markets. The death benefit and cash value vary with the performance of a portfolio of investments, which you select. The cash value and death benefit may grow more quickly in a variable life policy than in other types of policies, but you also have more risk. If the market does not perform well, your cash value and death benefit may decrease. Some policies guarantee that the death benefit does not fall below a minimum level.

 Variable-universal life policies combine features of variable and universal life policies. You have the investment risks and rewards characteristic of variable life insurance, coupled with the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.