Understanding Life Insurance
There are several types of Life Insurance they are not all the same. Let's discuss the basic most common plans. The Life Insurance decision is Very Important because life insurance cost is based on your mortality and health. As you age, your mortality rate increases. The longer you delay purchasing a plan, the older you get and your cost to buy a policy goes up! Your health status may change also. Facts: You should control your own policy. Decide How long you desire coverage. Decide how much protection you need. Use a Life calculator to estimate how much insurance you need. (Click the Life Calculator button below to figure your needs.)
Group Life Insurance: Coverage normally given by an Employers or Unions and they control and own the policy. The key to Life Insurance is who owns the policy. In group Life Insurance the Employee gets a "Certificate of Coverage" not a insurance contract. The key to group insurance is that you must be a member of the group. If you lose your membership you lose your coverage. Your employer can offer up to $50,000 that he/she pays and the Employer gets a full deduction from payroll and taxes. They may offer you the option to increase the death benefit at a modest payment that you pay, but you still have no control of the policy. The "Basic" Group Life is normally a benefit offered that you don't pay for. Not suitable for estate planning. No medical underwriting is necessary to get the policy which is great for those who can't buy a policy because of health issues.
Term Life Insurance: This is the cheapest coverage to buy. Because the policy focus the coverage in the younger ages and expires in the beginning of the senior years or earlier. This is great to protect your "stuff". Term Life is used to pay off a mortgage for the family, or college completion fund or cover debt in case of early death. Term coverage will require medical evaluation, Benefits are Tax Free. You own and control the policy. The typical policy covers a level period for 10-30 years and as you age the longer periods are no longer offered for new business. After the Level Term period the premiums climb to unaffordable rates and the policy will terminate after 30 days of non-payment. Not suitable for protecting your senior years because the policy expires or premium increases past your capability to pay. Some plans may convert to a Permanent policy within a period of time without medical evaluation, however it will be issued at the age of the conversion date.
Permanent Life Insurance: Coverage that covers permanently. Your death benefit payment ends the coverage! Policy period may extend to age 120! Features: These plans offer " investment options" which in recents years are Very Competitive. It provides tax saving features. Some investment options may pay double digit returns in good economic conditions but offer a guarantee minimum rate. Investment interest compound on a "Tax Deferred" basis. Death Benefits are normally paid out "Tax Free". In the past few years the DOI has approved the use of "Living Benefits". Now the Death Benefit of the "new type" of policies may allow the tax free Death Benefit to be paid to the insured while they are alive to pay for Health Care Benefits specified in the policy. The normal Living Benefits are named; Chronic Illness, Critical Illness and Terminal Illness Benefits. This option gives the policy owner the option to split up the survivor benefit for Death only or a combination of Health Care and Death. The downside to Permanent Life is that the policy covers up to your mortality year (death). Because the policy last so long the premiums are higher. You would be wise to lock this policy up in your early years. If you have a limited income then you may want to use a combination of the Term Policy and the Permanent plan. (Our office can design a plan that will fit your needs and fit your budget.) Another benefit of Permanent plans is that because they are also a savings program you have access to the savings (cash value) using loans and withdrawals. Some plans offer "Zero Interest Loans" and other strategies that make them very attractive for "College Funding", "Tax Free Retirement Income", Early Retirement Planning", "Emergency Cash", etc. There are normally no IRS age 59 1/2 penalties. The savings can be applied to pay the premium should you lose your job without cancelling the plan. Medical evaluation will be required. You own and control the policy. Investment options are considered "Long Term". Access to savings may be restrictive in the early stages of the plan.
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Agency Number: OE22534