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Life Insurance
Life Insurance
Insurance can play a key role in a comprehensive financial plan. In fact, many plans may not be complete without it. Consider the following:
If you were to pass away, would your family have the necessary resources to maintain the lifestyle they’re accustomed to?
What would happen to the children’s plans for college?
Could your family afford the mortgage left behind on your home?
How long would your dependents require support after your passing?
Additionally, life insurance may play an integral role in:
Retirement planning. The cash value account of permanent life insurance generally grows tax-deferred and can be used to help grow your resources for retirement while also providing a life insurance benefit to your family.
Business planning. Life insurance may provide the capital necessary to replace and train a key employee whose death could negatively affect business. It may also be used as a business succession tool, helping to transfer ownership of your business according to your will upon your passing.
Estate planning. Life insurance can be used to establish a trust, define your legacy, set up an annuity, fund a charity of your choice, and much more.
Term vs. Permanent
Term Life InsurancePermanent Life Insurance
Provides coverage for a set period of time, referred to as the term, generally ranging from 1-30 years.Offers protection for your entire lifetime, as long as you pay the premiums required to stay in good standing.
Should you pass away during the term, your beneficiary will receive the policy’s death benefit.A portion of each payment is designated to a cash value account; this value will generally grow tax-deferred for the length of the policy.
At the end of the term, your coverage may be renewable, or the policy may simply terminate.You may take loans from the cash value account, but any unpaid loans at the time of death will reduce benefits awarded to your beneficiary
Different Types of Permanent Life Insurance
There are a number of types of permanent life insurance including:
Whole Life
A guaranteed required premium and guaranteed minimum cash value and death benefit are all fixed at the time the policy is issued. However, the cash value may grow beyond the initial guarantees through dividends or a declared crediting rate.
Universal Life
A premium schedule is provided at policy issue based on a set of current assumptions, but policy owners have the flexibility to skip, reduce, or increase premiums based on their needs. As long as the policy expenses and cost of insurance are covered by premiums paid or available cash value, the policy will remain in force, and excess premiums will accumulate and grow in the cash value account. Cash value growth is based on the insurer’s declared crediting rate.
Indexed Universal Life
A premium schedule is provided at policy issue based on a set of current assumptions, but policy owners have the flexibility to skip, reduce, or increase premiums based on their needs. As long as the policy expenses and cost of insurance are covered based on premiums paid or cash value, the policy will remain in force, and excess premiums will accumulate and grow in the cash value account. Cash value growth is based on the performance of an equity index such as the S&P 500. Click this text to start editing.
For many, life insurance is a critical component of an overall financial plan, and selecting the right amount of coverage and policy type can be a challenge. As with all investments, it’s important to monitor life insurance policies to determine if they’re helping you to achieve your financial goals.
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