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What is Life Insurance?
Types of Life Insurance
Term Life Insurance
Whole Life Insurance
Universal Life Insurance
Second-to-Die or Survivorship Life Insurance
What is life insurance?
Life insurance is a contract binding a life insurance company to
compensate a beneficiary for the death of a person insured. If the
insured dies, the company will provide a cash payment to the beneficiary.
Life insurance is used to protect the economic value of a human
life with regards to those who may be financially dependent upon
it.
Types of life insurance
Term Life Insurance
Term life insurance provides protection for a specified period of
time. A death benefit is paid to the beneficiary if the insured
dies within a specified period of time while the policy is still
in force. Many term life insurance plans can be converted to permanent
life insurance plans without evidence of insurability. Two types
of term life insurance are yearly renewable term and level premium
term.
Yearly renewable term life insurance has premiums that are initially
low; however, the premiums increase substantially as the insured
gets older. These plans have diminished in popularity due to the
introduction of level premium term life insurance.
Level premium term life insurance has premiums which remain level
over a specified period of time. These plans have premiums that
remain level for a period of 5, 10, 15, 20, 25, and 30 years. After
the initial level period expires, the annual premium increases each
year, subject to a guaranteed maximum.
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For Term Life Insurance
Whole Life Insurance
Whole life insurance is permanent life insurance and provides protection
for life. As long as premiums are paid, a death benefit is paid
to the beneficiary. The premiums for whole life insurance policies
are designed to remain level over time. In addition, these policies
accumulate cash values on a tax-deferred basis. The rate of return
on whole life insurance cash values is dependent upon a number of
factors including the results of an insurance company's investment
performance. Cash values can be used for a variety of options:
Whole life insurance policies are valuable because they provide
permanent protection and accumulate cash values that can be used
for emergencies or to meet specific objectives.
The cash values of whole life insurance policies may be affected
by a life insurance company's future performance. Some factors that
influence a life insurance company's performance are expenses, mortality
experience, and investment performance.
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Quote For Whole Life Insurance
Universal Life Insurance
Universal life insurance is permanent life insurance. As long
as premiums are paid, a death benefit is paid to the beneficiary.
These policies are different from whole life insurance policies
because they offer the policy owner some flexibility to change the
premium payments and death benefit. The death benefit may be increased
subject to insurability or decreased, and the premiums can also
be increased and decreased as well as skipped. Universal life insurance
policies may be purchased with one of two different death benefit
options. One is a level death benefit and the second is an increasing
death benefit. Although premium payments are flexible, a universal
life policy will usually have a target premium which is the suggested
annual premium payment. The target premium for some companies is
sufficient to keep the policy in-force to age 100; however, this
is not guaranteed. Universal life insurance policies also accumulate
cash values on a tax-deferred basis. These cash values tend to be
interest-sensitive and can be used for a variety of options:
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The policy can be surrendered at anytime for the cash surrender
value.
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The policy owner can take out a loan and use the cash value
as collateral.
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The policy can be changed to a reduced amount paid-up whole
life policy.
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The cash values may be used to pay premiums for a certain period
of time.
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The cash surrender value can be used to supplement retirement
income.
Universal life insurance policies are valuable because they can
provide permanent protection and accumulate cash values that can
be used for emergencies or for meeting specific objectives. For
those who prefer flexibility, universal life insurance provides
more options than whole life insurance.
The cash values of universal life insurance policies may be affected
by a life insurance company's future performance. Some factors that
influence a life insurance company's performance are expenses, mortality
experience, and investment performance.
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Quote For Universal Life Insurance
Second-to-Die or Survivorship Life Insurance
A second-to-die life insurance policy insures the lives of two
people, typically a husband and a wife. The death benefit is not
paid to the beneficiary until the death of the second insured. These
life insurance policies are generally available as either whole
life insurance or universal life insurance policies, and premiums
are often less expensive than buying two life insurance policies.
Second-to-die life insurance policies are effective tools often
used by wealthy individuals in estate planning. They can be used
to pay estate taxes. By removing the proceeds of a life insurance
policy through the use of gifting policies and third party ownership,
a life insurance policy can be used to pay for estate taxes. Careful
planning by your tax and legal counsel, coupled with a properly
structured second-to-die life insurance policy, can help you preserve
your net worth.
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A Quote For Second-to-Die/Survivorship Life Insurance
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