Types of Life Insurance
Term life insurance is the most basic policy the can be purchased. This is because term life offers just pure death benefit protection, without any cash value build up. Because of this, term life insurance is often very affordable – especially for those applicants who are younger and in good health at the time of application.
With term life insurance, coverage is purchased for a certain length of time, such as for ten years, 15 years, 20 years, 25 years, 30 years – and in some cases, even longer. There is also a 1-year renewable term life insurance option that is offered by many of the best life insurance carriers.
Typically, when purchasing a level term life insurance policy, the amount of the premium will remain the same throughout the period the policy is inforce. Provided that the insured survives throughout the time period of the policy, and he or she wishes to remain covered by life insurance, they will need to re-qualify for a new policy at their current age and health status.
This is the simplest type of permanent life insurance coverage. The premium amount is locked in and will remain the same throughout the duration of policy. This can be helpful are on budget. It also means that if a person purchases a whole life policy at a very young age, they will still pay the same amount of premium when they get older – regardless of advancing age, or even an adverse health issue.
The funds that is in the cash value component of a whole life insurance policy is allowed to grow on a tax-deferred basis. This means that the gain on these funds will not be taxed until withdrawn – allowing them to compound exponentially over time.
At first, the cash in a whole life insurance policy will grow slowly. This is because the majority of the early premium dollars will go towards paying the agent’s commission and the insurance costs. However, over the years, the cash in a whole life policy can steadily grow, often with a minimum guaranteed rate of return.
Another form of permanent coverage is universal life insurance. This type of life insurance also provides a death benefit and a cash value component where the funds are allowed to grow tax-deferred.
Universal life insurance is more flexible than whole life coverage. This is because the policyholder is allowed – within certain guidelines – to choose how much of his/her premium dollars will go towards the policy’s death benefit, and how much will go towards the policy’s cash value.
Because universal life is a permanent life insurance policy, the policyholder will have access to their cash value account. So, just as with a whole life plan, the cash can be borrowed or withdrawn for any reason – including paying off debt, supplementing retirement income, or even going on a vacation.
With the many types of life insurance and carriers available, an allied can help you choose the coverage that will fit your needs. Contact us today – we’re here to help.
Getting life insurance doesn’t have to be hard. We have some easy steps that will walk you through to see if life insurance is right for you.
Who Needs It?
If someone will suffer financially when you die, chances are you need life insurance because it provides cash to your family after your death. This cash ( known as the death benefit), replaces your income and can help your family meet many important financial needs; like funeral costs, daily living expenses and college funding. What’s more, there is no federal income tax on life insurance benefits.
Many people mistakenly believe that they don’t need to think about life insurance until they have children. Not true. What if one of you die? Even with your surviving spouse’s income, would that be enough to cover debts like credit card balances, car loans; let alone cover the monthly expenses? If you’re planning to have children, you’ll want to buy life insurance now instead of waiting until pregnancy. (Some companies won’t issue policies to expecting mothers).
You’re Married With Kids
Most families depend on two incomes to make ends meet. If you died suddenly, could your family continue to meet all their financial obligations—from paying rent or the mortgage to daily living expenses? Could your family continue their standard of living on your spouse’s income alone? Would their plans for the future—like college stay intact? Life insurance makes sure that your plans for the future don’t die when you do.
You’re a Single Parent
As a single parent, you’re the caregiver, breadwinner, cook, chauffeur and so much more. Yet nearly four in 10 single parents have no life insurance. Many with coverage say they need more than they have. With so much responsibility on your shoulders, you need to be certain, that you have enough life insurance to safeguard your children’s financial future.
You’re a Stay-At-Home Parent
Just because your are a stay home parent, does not mean you don't contribute. Childcare, transportation and other household activities are all important tasks, the replacement value of these activities of which are often underestimated. With life insurance, your family can preserve their quality of life.
You Have Grown Children
Just because your kids are grown and have finished their schooling and the mortgage is paid off, doesn’t necessarily mean that you no longer need life insurance. If you die today, your spouse will still face with daily living expenses. Will your financial plan, without life insurance, enable your spouse to maintain the lifestyle you worked so hard to achieve now and into retirement?
Depending on the size of your estate, your heirs could be hit with a estate-tax payment of up to 45% after you die. The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of these taxes, funeral expenses and other debts without having to liquidate other assets, often at a fraction of their true value. Life insurance proceeds are also generally income tax free and won’t add to your estate tax liability, if properly structured.
You’re a Small-Business Owner
Besides taking care of your family, life insurance can also protect your business. What would happen to your business if you, one of your fellow owners or a key employee die tomorrow? Life insurance can help in a numerous ways. For instance, a life insurance policy can be structured to fund a buy-sell agreement. This would ensure that the remaining business owner, have the funds to buy the company interests of a deceased owner at a previously agreed price. That way, the owners get the business and the family gets the money. To protect a business in case of the death of a key employee, key person insurance, payable to the company, provides the owner with the financial flexibility needed to either hire and/or replace or work out an alternative agreement.
Most single people don’t need life insurance because no one depends on them financially. There are exceptions. For instance, some single people provide financial support for aging parents or a sibling with special needs. Others may be carrying significant debt that they would not want to pass on to family member who survive them. Insurability is another reason to consider life insurance when you’re single. If you’re young, healthy, and have a good family health history, your insurability is at its peak and you’ll be rewarded with the best rates on life insurance.