Life insurance comes in various forms. It is a promise made by an insurance company to pay a death benefit to a beneficiary on the death of the insured, in exchange for a series of premium payments from a policyholder. Typically, the death benefit will be many times larger than any single premium.
What are the benefits of life insurance?
In the most general terms, owning life insurance guarantees that, at the death of the insured, a death benefit will be paid to the insured’s beneficiaries. In addition, permanent insurance provides a cash value component from which cash can be accessed for various financial needs such as college tuition, a down payment on a home, business opportunities and more. Contact us to learn more about the benefits of life insurance.
Who needs life insurance?
Everyone needs life insurance, if only to pay final expenses. People with children or other family members are financially dependent on them may need more life insurance than those with other needs or goals. Perhaps the best way to determine if you need life insurance is to ask yourself: "Financially, would my family be able to live tomorrow as they do today, if I were no longer around?" If your answer is no, then you probably need life insurance. Contact us for more information or a quote today.
Types of Life Insurance
Term Life Insurance
Term life insurance typically has the lowest out-of-pocket cost of all life insurance policies. It does not provide permanent coverage, but instead provides a death benefit for a specified period of time (the "term"). Many of today's term life insurance policies offer a terminal illness rider which allows for a portion of the death benefit to be advanced to you if you were ever diagnosed with a terminal condition.
Whole Life Insurance
Whole life insurance is designed for permanent coverage on the life of the insured. With a whole life insurance policy, the premium is guaranteed to never increase and the death benefit is guaranteed for life. It also has a cash value component that builds guaranteed cash value that can be accessed for various needs. Whole life insurance may pay dividends to policyholders. Dividends can be used to purchase additional coverage, reduce the premium, pay back loans or may be received as cash.
Universal Life Insurance
Universal life insurance (UL) can provide permanent coverage for the life of the insured, and also gives the policyholder a little more flexibility with respect to the timing and amount of premium payments. The cost of insurance is deducted from the policy’s cash value. UL comes in two different forms: Current Assumption UL and Death Benefit Guarantee UL.
Current Assumption UL
Current assumption UL bases policy performance on interest rates available in the financial markets and on a company’s current mortality experience. If interest rates and mortality perform according to expectations, the premiums needed to keep the policy in force should remain the same. If interest rates fall, or mortality gets worse, higher premiums may be required to keep the policy in force. On the other hand, if rates rise or mortality improves, future premiums may be reduced.
Variable Univeral Life (VUL) Insurance
Variable universal life (VUL) is a variation of a current assumption UL policy. It offers a death benefit and cash accumulation. The primary difference between a UL policy and VUL policy is that the cash value in a VUL policy is allocated to underlying portfolios of securities in a separate account based on the policyholder's selection. The cash value is not guaranteed and fluctuates based on the market performance of the underlying portfolios selected.