Tag: life insurance

5 Types of Life Insurance

Life Insurance Arlington is an investment in your family’s future. It can help pay off your mortgage, funeral expenses, children’s education and other debts.

Whether you choose a term or permanent policy, it pays a death benefit to your beneficiaries when you die. It also builds cash value and often includes health and wellness benefits.

Life insurance is designed to provide a payout for the people you choose (called beneficiaries) upon your death. This money can help them cover funeral expenses, pay off debt, or meet other financial obligations. Most people get life insurance to ease the burden on their loved ones after they die. It can also be a way to protect your family from the potential economic impact of a long-term illness or disability.

There are two primary types of life insurance: term and whole life. Term policies are designed to last for a specific time period, such as 10, 20, or 30 years. When the policy expires, it no longer provides coverage. However, you can renew it for another term, convert it to a permanent policy for a higher premium, or buy a new policy.

Some insurers offer level term policies in which the premium remains the same throughout the entire term of the policy. Other insurers offer a rising term option where the premium will increase over time, usually every year or several years. You can also purchase a decreasing term policy where the premiums will decrease over the course of the term, resulting in a smaller death benefit.

Unlike whole life insurance, term policies do not build cash value that you can borrow against. This is one reason they tend to be cheaper than whole life. Whether you decide to go with a term or a whole life policy, it is important to weigh the pros and cons of each before making a decision.

When you apply for a term life insurance policy, the insurer will review your medical records and may require an examination. Depending on your results, the insurer may decline to issue the policy or may approve it with an exclusion or limitation. This is why it is important to answer all questions honestly and accurately on the application.

Whole Life

Whole life insurance offers a variety of features that can help you and your loved ones feel secure about your family’s future. Unlike term life insurance, it provides lifetime coverage and a fixed premium that’s guaranteed to never increase. In addition, it builds a savings component called cash value, which you can borrow against or withdraw from at any time — tax-favorably, through First-In-First Out (FIFO) rules.

A portion of each premium goes towards your policy’s cash value, which is invested with a guaranteed rate. The rest is used to pay for your coverage and other expenses. This feature gives you peace of mind that you can access your money when you need it, whether for a down payment on a home, college tuition or additional retirement income.

In addition, whole life policies offer the ability to grow the policy’s cash value by earning annual dividends. In most cases, these are credited to the cash value account and may be used to reduce your premium, cover expenses or purchase paid-up additional insurance.

This is especially helpful when preparing for long-term goals such as retirement. Having access to your policy’s cash value can help you avoid the need to withdraw or borrow against the death benefit when your needs require it.

Another advantage of whole life insurance is that it can help provide financial security for families who depend on a single breadwinner. A death benefit payout can help them continue their lives without the worry of losing out on income and other potential responsibilities.

While whole life insurance is a great way to provide financial protection and accumulate savings, it’s also a popular choice for those who want to save on taxes. With proper planning and a trusted Life financial professional by your side, you can find a balance of financial protection and wealth accumulation that’s right for you.

Ready to learn more about life insurance? Contact us today to discuss your options and determine which type of coverage is best for you. We’re here to help you achieve the future you envision for yourself and your loved ones.

Universal Life

Universal life insurance offers a death benefit and a cash savings component with the flexibility to adjust premiums up or down as your financial situation changes. Unlike term life, this type of policy lasts your entire lifetime, providing coverage for your beneficiaries after your death. You can also borrow against or cash in this savings portion, and it grows tax-deferred over your lifetime. Depending on the specifics of your policy, it may include additional benefits like accelerated death benefits, chronic illness riders and waiver of premium riders.

This type of policy has several different types. The most common is a guaranteed universal life (GUL) policy, which has fixed premiums and a set death benefit. GUL policies typically have low fees that don’t change over time and they offer a stable rate of return on your cash value, which you can access by taking a policy loan or withdrawal.

Another type of UL is an indexed universal life (IUL) policy, which allows you to add money to your policy that’s invested in indexes like the S&P 500 or Nasdaq. This can provide better returns than other investments, though the gains you receive are not guaranteed and there is more risk associated with IUL policies.

A variable universal life (VUL) policy is a complex product that combines elements of both whole and GUL policies. It’s often difficult for consumers to understand, but it can offer more potential for investment-related gains than other types of UL policies. A VUL policy can also require more active management, as you’ll be required to monitor the performance of underlying sub-accounts in order to take advantage of opportunities for growth.

Regardless of which type of universal life insurance you select, it’s important to understand that your policy will have fees associated with the initial purchase and the continued operation of the policy. These fees are intended to cover the cost of administering your life insurance policy as well as provide a small amount toward the building of the cash account. In addition, there are other costs related to your life insurance policy that should be taken into consideration as you evaluate your options.

Variable Life

As the name suggests, variable life insurance allows you to vary the amount of money in your policy’s cash value account by letting you choose from a number of investment options. These include mutual funds, equities and bond funds. You may also have the option to add a fixed interest rate account, which pays a guaranteed minimum interest rate. Your cash account’s growth depends on how well your selected investments perform and the death benefit amount that is added to the original premium.

Because your death benefit may decrease over time, these policies are not suitable for everyone. But for those who are more risk-tolerant and don’t mind paying suspicious fees, a variable life policy can be a good fit.

You must have enough cash in your account to pay the annual fees and avoid a lapse, in which case your coverage is cancelled. To avoid a lapse, it’s essential to carefully review the prospectus (the document that spells out the policy’s internal fees and expenses, as well as its investment options and death benefit) and fully understand your options. You’ll likely need the help of a financial professional or independent life insurance agent to do this.

Another factor to consider is the company’s reputation and history. The National Association of Insurance Commissioners maintains a complaint index that reveals an insurer’s reputation and track record for handling complaints. Check that index and ask for a copy of the insurance company’s rating before signing up for a variable life policy.

Unlike whole life or other permanent policies, you can cancel a variable life policy within a free-look period — usually 10 to 30 days. This allows you to change your mind without incurring a surrender fee, which is a percentage of the total face amount of the policy.

Before you buy a variable life policy, examine the internal costs and compare it with other companies’ quotes. Also look for a guarantee that the policy won’t lapse. Generally, Flagg says, you’ll get better cash value growth if you select an insurer with lower internal costs.

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