Life Insurance is a financial tool that provides coverage for your loved ones in the event of your death. It helps cover things like medical bills, funeral costs, debt, loans, and day-to-day expenses.
It also gives your beneficiaries peace of mind. Many types of life insurance are available, and each offers a different level of protection. Visit https://www.legacylifeinsured.com/ to learn more.
The death of a loved one can be financially devastating to those left behind. Life insurance offers a way to provide income to help pay for everyday expenses, funeral costs and other debts. Term life policies offer protection for a specific period of time and typically have lower premiums than other types of life insurance.
Term life policies guarantee payment of a fixed death benefit to beneficiaries if the insured dies within the specified time period, or “term” of the policy, which may range from 10 to 30 years. Term policies do not accumulate any cash value or offer savings components, as are found in permanent life insurance products. After the expiration of a term policy, you can choose to renew it for another term, convert it to permanent coverage or let it lapse.
In addition to traditional term life insurance, Primerica also offers accelerated underwriting options and simplified issue term life insurance. These policies are available to those with health conditions that might prevent them from obtaining conventional term insurance without a medical exam. These policies can also save you time by avoiding the delay associated with underwriting.
The accelerated underwriting process allows you to receive coverage in days, rather than months. With the simplified issue option, you can avoid the medical exam altogether and may only be asked a few health questions instead of answering lengthy health history questions. Both are great ways to get life insurance quickly and easily.
Term life insurance provides financial protection to your family and is a cost-effective way to cover major expenses such as funeral costs, childcare, or mortgage debt. It can also be used to replace lost income to help your spouse maintain a comfortable standard of living in the event of your death.
Whole Life Insurance
Whole life insurance is an option that offers lifelong coverage, builds cash value and can help with estate planning. It is a more expensive alternative to term life insurance, but it also provides more guarantees and features that may be attractive for some people. CNBC Select explores how whole life works and how it compares to other policy types to help you determine if it may be right for your situation.
Whole-life policies can be either participating or nonparticipating, with the former offering a chance to earn dividends on your premiums. This means that any excess premiums go toward your account, which can then be used to pay your death benefit, increase your policy’s coverage limits or just accumulate interest on a tax-deferred basis. While these dividends aren’t guaranteed, many companies, such as MassMutual, CNBC Select’s top pick for whole life insurance, have paid them consistently over the years.
One of the most important factors to consider when choosing a whole life policy is whether you can afford its premium payments, which are typically higher than those of a term policy. It’s essential to work with a financial professional who can help you understand your entire financial picture, including other investments and savings, to make sure you’re not overcommitting yourself.
Unlike term life, whole-life policyholders won’t have to renew their policies at the end of the set period. However, if you fail to keep up with your premiums, your coverage will expire and you could face a medical issue that could make it impossible for you to obtain a new policy in the future.
Whole life insurance is often used as a supplement to retirement plans, such as 401(k)s or individual retirement accounts (IRAs). You can also use it to pay for estate taxes, provide inheritance for heirs or even help your children with their college expenses. It’s an especially valuable tool for those with significant debt, as it can cover these costs and provide money for your beneficiaries at the time of your death. When shopping for a whole life policy, it’s important to choose a company with a strong track record and high ratings for financial strength and security.
Universal Life Insurance
Unlike whole life policies, which have a fixed death benefit and premiums, universal policy owners can choose to adjust the size of their premium payments (within limits). This flexibility, plus the ability to build cash value, makes universal policies popular with some investors. However, it’s important to understand the factors that affect your policy and how to avoid negative effects.
The monthly fee you pay into your universal policy is split into two parts: one part covers the costs of the insurance and the other goes into a savings and investment account, called the cash accumulation portion. The excess money in your account earns interest on a tax-deferred basis and grows over time. You can withdraw or borrow against this accumulated money, but doing so could reduce the death benefit your beneficiaries receive.
Universal policies are flexible, but they can be tricky to manage. For example, if you make too many withdrawals or loans from your account, they could deplete the funds and cause the policy to lapse. To avoid this, it’s important to work with a financial professional who can help you stay on track with your policy’s objectives.
In addition to the flexibility offered by universal policies, there are other types of permanent life insurance that offer additional benefits. For instance, indexed universal life (IUL) policies combine the flexibility of a universal life policy with an investment component. In this type of policy, your accumulated funds can be invested in market-based options that allow you to potentially gain higher returns than traditional investments.
However, these strategies come with increased risk, so you’ll need to be comfortable with the level of risk you take on your investments. In addition, IUL policies typically have higher premium costs than other permanent life insurance policies.
It’s also important to remember that, while these life insurance policies are designed to last for your entire lifetime, the guaranteed parts of the policy (i.e. the death benefit) may not. The remaining non-guaranteed portions of the policy can increase as you age, so it’s important to review your policy periodically with a qualified advisor to ensure that it continues to meet your goals.
Variable Life Insurance
This type of life insurance offers a greater potential for growth than whole or term life. However, it also comes with a higher risk of losing money if the investments underperform. It’s a good choice for people who see life insurance as a form of protection and investment, and want the flexibility that premium payments can be changed within certain limits. It’s important to know that these policies contain different fees than those associated with other types of permanent life insurance. The prospectus should detail these charges and describe the separate accounts within the policy, which are like mutual funds.
The death benefit is determined by the performance of the separate accounts, or subaccounts, within the variable life insurance policy. It is important to understand the relationship between the life insurance death benefit and the overall performance of the subaccounts, so that you can make appropriate decisions about how much coverage you need. Some companies provide a fixed death benefit in addition to the accumulated cash value, while others will only pay the death benefit based on the performance of the separate account funds.
You should be prepared to invest a significant portion of your policy in these separate accounts. If you are unable or unwilling to do this, you may want to consider another type of permanent life insurance.
Most variable universal life insurance (VUL) policies offer a wide range of riders, which can help you tailor your policy to meet your specific needs. These may include additional term insurance, disability riders, long-term care coverage and income benefits.
A financial advisor can guide you through the options that might be right for your situation, and help you determine whether a variable life insurance policy is right for you. It’s a good idea to avoid picking a VUL policy based on quoted premiums or projected account growth, says Flagg. Regulations for most product types allow agents and brokers to quote low premiums or project high account growth, while charging high internal policy costs. These fees can offset any investment gains and potentially lead to a “premium call” or underperformance that could cause the policy to lapse.
