Life Insurance
The best way to identify an insurance or financial product to meet your needs is to meet with a professional independent agent, such as those affiliated with Liberty Assurance Group.
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A Little About Life Insurance
Your need for life insurance varies with your age and responsibilities. It is a very important part of financial planning. There are several reasons to purchase life insurance. You may need to replace income that would be lost with the death of a wage earner. You may want to make sure your dependents do not incur significant debt when you die. Life insurance may allow them to keep assets versus selling them to pay outstanding bills or taxes. (1)
All policies are not the same. Some give coverage for your lifetime and other cover you for a specific number of years. Some build up cash values and others do not. Some policies combine different kinds of insurance, and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. There are two basic types of life insurance: term insurance and permanent insurance.
Term Life Insurance
Term insurance generally has lower premiums in the early years, but does not build up cash values that you can use in the future. You may combine cash value life insurance with term insurance for the period of your greatest need for life insurance to replace income.
Term insurance covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally offers the largest insurance protection for your premium dollar. It generally does not build up cash value.
You can renew most term insurance policies for one or more terms, even if your health has changed. Each time you renew the policy for a new term, premiums may be higher. Ask what the premiums will be if you continue to renew the policy. Also ask if you will lose the right to renew the policy at some age. For a higher premium, some companies will give you the right to keep the policy in force for a guaranteed period at the same price each year. At the end of that time you may need to pass a physical examination to continue coverage, and premiums may increase. You may be able to trade many term insurance policies for a cash value policy during a conversion period even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.
Permanent Life Insurance
Permanent insurance (such as universal life, variable universal life and whole life) provideslong-term financial protection. These policies include both a death benefit and, in some cases, cash savings. Because of the savings element, premiums tend to be higher. (2)
Four Basic Types of Permanent Life Insurance:
- Whole or Ordinary Life
- The most common type of permanent insurance.
- The premiums and death benefit generally remain constant over the life of the policy.
- Universal or Adjustable Life
- Offers flexibility of premium payments and death benefit, both of which you can adjust, within certain limits, to fit your situation.
- Variable Life
- The policy's value is tied to the performance of financial markets.
- The death benefit and cash value vary with the performance of a portfolio of investments, which you select.
- The cash value and death benefit may grow more quickly in a variable life policy than in other types of policies, but you also have more risk. If the market performs poorly, the cash value and death benefit may decrease.
- Some policies guarantee that the death benefit will not fall below a minimum level.
- Variable-Universal Life
- This policy type combines features of variable and universal life policies.
- This policy type has the variable cash value feature of variable life.
- This policy type also features the adjustability of concept of universal life.
Whole Life Insurance
A whole life policy offers lifelong, permanent insurance protection that is ideal for individual, business or estate planning needs. The tax-free death benefit can allow your loved ones the financial security to continue their accustomed standard of living if you die prematurely. For business owners, the protection provided by a whole life policy can assure that your company will have the finances to continue to operate after your death.
Universal Life Insurance
As your business and family grows, your income and responsibilities increase,
so your life insurance coverage can should be adjusted to the new circumstances.
Because of its flexibility, universal life is one of today's most dynamic
and versatile insurance plans. Along with the distinct benefits and tax
advantages of permanent insurance, universal life can adapt to your changing
needs. You can vary your premium amounts, the timing of premium payments,
and the death benefit, within certain parameters.
More Information
To download the "Life Insurance Buyer's Guide" published by the National Association of Insurance Commissioners (NAIC).
To learn more about life insurance, visit Midland National Life Their website provides quick access to useful information under "Prospective Policyholders".
We also recommend the estate planning section at Prudential.
To order a printed copy of "Selecting the Best Estate Planning Strategies" from Protective Life, send us an e-mail, or call us toll free at (888) 524-4621.
To order a printed copy of "Financial Planning for Your Business" from Protective Life, send us an e-mail, or call us toll free at (888) 524-4621.
Search for publications about inheritance issues at the Internal Revenue Service website.
1. "Who Needs Life Insurance?" National Association of Insurance Commissioners as published on their Internet site at "www.naic.org" on November 1, 2008.
2. "What Is the Right Kind of Life Insurance?" National Association of Insurance Commissioners as published on their Internet site at "www.naic.org" on November 1, 2008.