Life Insurance

Life Insurance is an invaluable source of funds for your family in order to meet their needs if you should pass away. A contract is made between you and an insurance company who will pay your beneficiaries a death benefit upon your death. You make periodic payments to the insurance company. These payments are called 'premiums'. The amount of each premium depends on your age, gender, occupation, medical history, and whether you want to build cash value in your policy. Some products or carriers may require that you take a paramedical examination to satisfy other underwriting requirements.

Life Insurance is a unique product that can fulfill a variety of needs. Life Insurance can create instant Estates, replace family income due to the death of the primary family wage earner, and can also provide instant liquidity to pay inheritance taxes, funeral expenses, and such outstanding financial obligations as home mortgages, car loans, and business debts. It can also serve as a meaningful place to imbed capital, and compound it tax deferred, while providing professional money management with investment flexibility and multiple tax efficiencies.

There are two basic types of Life Insurance, and both types pay an income tax free death benefit (death benefit guarantees depend on the claims paying ability of the issuing insurance company). The question often remains...which should you choose?

Term Life Insurance

Term Life Insurance provides protection for a limited period of time (10, 15, 20, and 30 year term), and pays a tax free death benefit only if you die during the term. For this reason, it is commonly referred to as temporary insurance. While term policies do not accumulate cash value, most offer conversion privileges which allow you to convert to permanent policies without the need for a medical exam within a prespecified time period.

Term insurance is right for you if:

  • You want life insurance coverage to help protect a short-term need, either to pay off a loan or business debt, or to provide a death benefit during your peak earning years while your children are young.
  • You can't afford a permanent policy now but need protection until you can convert to a permanent plan.
  • You need to add a large amount of coverage to complement your existing permanent policy at the lowest possible cost.
  • You are willing to pay premiums that may increase if you extend coverage past the initial term period (it should be noted that some types of term coverage increase annually - these should be avoided).

Permanent Life Insurance

Permanent life insurance is a form of life insurance such as Universal Life, Whole Life, or Endowment, where the policy is for the life of the insured, the payout is assured at the end of the policy (assuming the policy is kept current) and the policy accrues cash value.

Permanent Life Insurance is right for you if:

  • Your need for life insurance is lifelong, or permanent.
  • You require or would like to build up cash value in the policy.
  • You wish your premiums to remain level.
  • You have the money to start your policy now, and wish to avoid the high costs of renewing term insurance in later years.

Combining Permanent and Term Insurance

Of course another option is to combine permanent and term insurance coverages to obtain the advantages of both. This can help ensure that large debts and obligations are attended to in the event of your premature death. For example, a combination of coverages can be used to help insure a mortgage or child's education, while providing for your final expenses and family's financial security.

Combined coverage might be right for you if:

  • You need permanent insurance protection, but must start with an affordable premium.
  • You already own a permanent policy but want to increase your death benefit to pay off a new second mortgage in the event of your death.
  • Your employer provides a term policy in a multiple of your annual salary. You decide to purchase your own permanent policy to meet your additional insurance needs and to help ensure coverage exists even if you leave your employer at some future point. It is always wise to carry your own personal policy to protect against leaving your employer and keeping the protection in place.