Term Life Insurance
Term life insurance is a form of life insurance that covers the insured person for a certain period of time and the “term” is specified in the policy. It pays a benefit to a designated beneficiary only when the insured is deceased within that specified period which can be 1, 5, 10 or even 20 years. Term life policies are renewable, but premiums increase with age.
Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from 1 to 30 years. Most term policies have no other benefit provisions.
Level term means that the death benefit stays the same throughout the duration of the policy.
Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy’s term.
Permanent / Whole Life Insurance
Whole life or permanent insurance pays a death benefit whenever you pass away — even if you live to 100! There are three major types of whole or permanent life insurance, traditional whole life, universal life and variable universal life, and there are variations within each type.
In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it gets quite high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most individuals to afford life insurance at advanced ages. Therefore, they keep the premium level by charging a premium that, in the early years, is higher than what’s needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older individuals.
By law, when these “overpayments” reach a certain amount, they must be available to the policy-owner as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.
WHY SHOULD I PURCHASE PERMANENT INSURANCE?
A permanent life policy provides lifelong insurance protection. The policy pays a death benefit if you die tomorrow or if you live to be a 100. There is also a savings element that will grow on a tax-deferred basis and may become substantial over time. Because of the savings element, premiums are generally higher for permanent than for term insurance. However, the premium in a permanent policy remains the same, while term can go up substantially every time you renew it.
In a permanent policy, the cash value is different from its face value amount. The face amount is the money that will be paid at death. Cash value is the amount of money available to you. There are a number of ways that you can use this cash savings. For instance, you can take a loan against it or you can surrender the policy before you pass away to collect the accumulated savings.
Traditional whole life insurance is the most common type of permanent insurance policy. It offers a death benefit along with a savings account. If you pick this type of life insurance policy, you are agreeing to pay a certain amount in premiums on a regular basis for a specific death benefit. The savings element would grow based on dividends the company pays to you.
Traditional Whole Life Insurance
Universal Life Insurance
Universal / adjustable life insurance is a type of policy offers you more flexibility than whole life insurance. You may be able to increase the death benefit during the life of the policy within limits, if you pass a medical examination. The savings vehicle, known as a cash value account, generally earns a money market rate of interest.
After money has accumulated in your account, you will also have the option of altering your premium payments — providing there is enough money in your account to cover the costs. This can be a useful feature if your economic circumstance has suddenly changed. However, you would need to keep in mind that if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage will end. You should check with your agent before deciding not to make premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.
Variable life insurance combines death protection with a savings account that you can invest in stocks, bonds and money market mutual funds. The value of your policy may grow more quickly, but you also have more risk at the same time. If your investments do not perform well, your cash value and death benefit may decrease. Some policies, however, guarantee that your death benefit will not fall below a minimum level.
Variable Life Insurance
When you purchase variable-universal life insurance, you fundamentally receive the 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.
Variable- Universal Life Insurance
Final expense insurance helps families cope with the loss of a loved one by guaranteeing all funeral and burial expenses will be paid for. With so many different options to choose from, the cost for a service, burial plot, casket, and headstone can range anywhere from $1,000 to $10,000, and the grieving period is no time to be making complicated financial decisions.
Final Expense Insurance
These insurance policies can be purchased as A STAND-ALONE BASIS OR AS A BUILT-IN RIDER TO THE LIFE INSURANCE.
INDIVIDUAL LONG-TERM CARE (LTC) INSURANCE
Long Term Care is the type of care received either at home or in a facility, when someone needs assistance with activities of daily living, such as bathing and dressing due to an accident, an illness or advancing age.
Rising life expectancy means that the potential need for “long-term care” grows with every passing year of your life. The likelihood is that you or a member of your family will need long-term assistance due to a prolonged illness, a disability, or general deterioration of your health and ability to perform routine daily activities.
Most long-term care expenses are not covered by Social Security or Medicare, Medicare Supplement (“Medigap”), or private health insurance. Medicaid pays for nearly half of all nursing home care, but you must meet federal poverty guidelines and may have to “spend down” most of your assets on health care.
INDIVIDUAL DISABILITY INSURANCE
Individual Disability Income Protection is a must for a business owner, and highly recommended for executives. If you are a business owner, you should consider purchasing both group and individual policies, if possible. As an executive, you should be sure to obtain group long term disability insurance coverage if it is available.