Buying life insurance is about you and protecting the ones you love. We’re here to help you do that by answering questions, simplifying the purchase process and ensuring the policy you choose provides the best value for your money.
Why do I need life insurance?
Although you may not think about it, your ability to earn income is a significant asset and life insurance helps replace lost income in the event of your premature death. Here are some reasons people buy life insurance:
- To replace income the family would need to maintain their standard of living after the death of a wage earner.
- To pay off a mortgage loan and other personal and business debts or to create a rent fund.
- To create a fund for children’s education.
- To pay final expenses, such as funeral costs and taxes.
- To create a family emergency fund or a fund for a family member with special needs.
There are several different types of insurance, mostly confusing! Most folks are aware of Term, and know that Whole Life exists but they are not quite sure what the difference is. I’ve “borrowed” lot’s of terminology from Ask.com to put this page together. It is more of a glossary than anything else, but should help in distinguishing one form of insurance from another.
Term life is the simplest and least expensive type of policy. It’s pure insurance with no cash value account. A term life policy has only one function: to pay a specific lump sum to whoever you’ve designated, upon a specific event – - your death. The death benefit and the policy limit are the same – - a $200,000 policy pays a $200,000 death benefit. The policy protects your family by providing money they can invest to replace your salary, as well as to cover final expenses incurred by your death. You can also purchase term with a return of premium rider, but it can add $$$ to your premiums.
Other types of life insurance provide both a death benefit and a cash value account (like a savings account). Premiums are larger than term life premiums because they fund the savings account in addition to buying insurance. These policies are often referred to as cash value policies. They include:
Whole life insurance which provides permanent protection for your dependents while building a cash value account. With this type of insurance the insurance company manages the policies various accounts.
It pays a death benefit to the beneficiary you name and offers you a low risk cash value account and tax-deferred cash accumulation. Whole life provides a fixed premium which can’t increase during your lifetime as long as you continue to pay the planned amount, and it allows the insurance company to exclusively manage the cash value account in your policy. You have the option to receive dividends from your policy or apply them to reduce payments. It offers you the right to withdraw from the policy during your lifetime.
This type of policy does not offer the account flexibility to invest in separate accounts such as money market, stock, and bond funds.
It allows the death benefit to vary in relation to the fund returns of the cash value account and allows you to borrow from the policy during your lifetime.
However, it offers no guarantee to the amount of cash value during your lifetime and offers no premium flexibility.
Universal life insurance provides permanent protection for your dependents and is more flexible than whole life. It pays a death benefit to the beneficiary you name and offers you a low risk cash value account and tax deferred accumulation.
This type of insurance allows you to earn market rates of interest on your cash value account and the right to borrow or withdraw from the policy during your lifetime.
Universal allows you premium flexibility and face amount flexibility.
Universal Variable life is the type of insurance which gives you more control of cash value account policy features than any other insurance type. It pays a death benefit to the beneficiary you name and offers you low risk tax deferred cash value options.
It offers separate accounts for you to invest in such as money market, stock, and bond funds, premium flexibility, and you can make withdrawals or borrow from the policy during your lifetime.
It stipulates that if you terminate the contract in early years you will receive less cash value total return than in a whole contract.
It requires you, the policyholder, to devote time to manage the accounts. The policies long term success is contingent on the investment you make.
It doesn’t work well with small premium amounts because your premium must cover your insurance and your accounts.
Fixed Index Universal Life One of the fastest growing insurance classes out there. Very flexible, and NOT tied to market loss. You can earn based on market growth, but you will not lose if the market crashes and burns (like you can with variable ul). Great product, and perfect for this economic climate!
Lot’s of choices, many different plans! Contact me to discuss your current financial situation and we will find the plan that works the best for you as an individual, or for you and your family!
You can also go to: www.jglassfinancialgroup.com for free quotes