Feel at peace knowing your loved ones are protected.
If you support others—either financially or with a time commitment—you should consider a life insurance policy.
Ask yourself the following questions:
How will necessary bills like mortgage, car payments, or utilities be paid in the event of my death?
How will my family cover my final expenses?
How will my family replace my income after my death or if I become disabled?
You may already be familiar with the basic concept behind a life insurance policy, but you may feel overwhelmed by your choices. Life insurance has many different variations and elective features, all designed to match a variety of consumers’ needs. Selecting the right insurance policy for your situation involves a great deal of examination and expert guidance.
A death benefit is the primary value that all life insurance policies provide. In the event of your death, your beneficiaries receive a benefit payout that helps with final expenses and replacing your income. With the expenses that a household might have—such as a mortgage, car payment, utilities, or a college education—losing financial support can place a significant burden on your family in addition to grieving your loss. Life insurance protects your survivors and ensures that you can still provide for your family, even when you are no longer here with them.
While securing a tax-free death payout is the main benefit of a life insurance policy, many consumers are unaware that certain types of life insurance can be used to accumulate a cash value that can accessed during their own lifetime. These life insurance policies grow a tax-free cash value that can increase the overall death benefit of the policy and may be accessed through loans or withdrawals. Some individuals will even use the cash value in their life insurance policy as a source of supplemental retirement income or as the means to fund vacations or cover emergencies.
Types of Life Insurance Policies
While policies will vary among carriers, contract types, and elected features, life insurance can be separated into two broad categories—term and permanent.
Term Life Insurance
Term life insurance policies are designed to last for a specific period, typically providing 10-30 years of coverage. If you die within your coverage term, the policy issues benefits. If, however, you outlive your term, your coverage ends, although you may have an option to renew your policy or convert to another policy before the end of the term. Term policies do not have a cash accumulation component and are often the least expensive life insurance contracts available.
Permanent Life Insurance
As the name suggests, permanent insurance is designed to provide coverage for an insured’s entire life, as long as premiums and applicable charges are met. In addition, these are policies that accumulate a tax-deferred cash value.
Common Types of Permanent Insurance
Whole Life Insurance
A whole life insurance policy provides lifetime coverage and a steady, guaranteed rate of accumulation.
Universal Life Insurance
Basic universal life insurance policies give the same coverage and guaranteed growth as whole life. However, the policy owner has flexible premium payment options and can choose between a level or increasing death benefit.
Indexed Universal Life
More information can be found here about Indexed Universal Life Insurance.
Within these categories there are many different versions and iterations. The information above is designed to provide a thumbnail sketch of life insurance and not intended to provide a comprehensive guide. Remember that life insurance varies with types, carriers, and additional features (i.e. riders). The right policy for you will depend on your situation and goals, which is why you will want to consider working with a trusted and experienced financial advisor.