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Life Insurance Protects The Ones That Matter The Most
In the busy day-to-day life, we often forget about the importance of insuring ourselves with life insurance. Its crucial to your peace of mind, as well as, your family’s that you provide them with financial security when it will matter the most. Afterall, you are a significant support and stability for their lives.
Knowing the Difference
Life Insurance and Burial (Final Expense) Insurance are two different products. Although both are related to the same topic, they contain variances in their benefits to policyholders. Life insurance pays a certain of amount of money to loved ones after the policyholder dies. This money can then go toward final expenses, but the benefits have no restrictions on how it is used.
Here's Are A Few Life Insurance Policy Options
Option 1 - Term Life Insurance
Term Life is basic insurance coverage that doesn’t build a cash value. These are bought to provide death benefits for a specific duration of time which causes a lower premium. These can be extended or converted into another type of coverage.
- Temporary coverage for a period of 10-30 years
- Has no cash value accumulation
- Fixed premium for an initial period
- Guaranteed death benefit if only for the length of term period coverage
There are variations that are included in Term Policies including:
- Annual Renewable and Convertible Term Policies provides protection for a year. This allows policyholders to renew the policy for successive periods; however they are offered at a higher premium and have no insurability. They can be converted into whole life policies without additional underwriting.
- Level Term Policies offer an initial guaranteed premium level for a specified period of time. The long the guarantee the greater the cost to the policyholder. These can be renewed after the guaranteed period; however the premiums are increased as the policyholder ages.
- Decreasing Term Policies have a level premium and are used in conjunction with mortgage debt protection. The downfall is the amount of the death benefit decreases as time goes on.
Option 2 - Permanent Life Insurance
Permanent Life Policies are plans that do not expire and combine a death benefit with a cash value. Cash values are generally tax-deferred (do not pay taxes on any earnings in the policy as long as it is active) and can have money withdrawn without tax penalties. These are either:
- Permanent Whole Life is insurance that builds cash value for life; however the cash value typically builds at a lower rate.
- Lifetime coverage
- Have a guaranteed cash value accumulation
- Fixed premium
- Lifetime guaranteed death benefit
- Permanent Universal Life Insurance offers flexible options for the policyholder to shift money between the insurance and savings components of the policy to meet their individual needs and circumstances. This differs from whole life insurance through allowing the cash value to grow at a variable rate. These rates can be adjusted monthly and offer multiple options in which the policyholder can invest in. There are a few options to choose from:
- Guarantee Universal Life is a provision of both a death benefit and built-in no lapse cash value guarantee for the entire life or selected duration of the insured. This is different because the amount on the premium varies based on the needs and timing of the policyholder. This is done with the policyholder maintaining sufficient policy value. Guaranteed Universal Life Insurance is more flexible than whole life; however there are additional risks. These risks include: having fewer guarantees, maintaining constant and careful management over premium payments, and added distribution to be taken to ensure your policy will stay in-force.
- Coverage can be temporary or lifetime
- Cash value accumulation is based on an interest crediting rate that is set by the insurance company
- Has a flexible premium
- Guaranteed death benefit has lifetime coverage or "dialed down" to any length of coverage
- Index Universal Life similar to universal life insurance; however, it gives the policyholder the option to allocate their cash value amounts to a fixed or equity index account. Indexed accounts offer a variety of indexes to choose from such as S&P 500 and Nasdaq 100; as well as, offer policyholders to decide on a percentage of their fund in which they could be allocated into fixed or indexed portions. There is a cap on the maximum return that a policyholder can receive. Index policies are typically inexpensive and are safer than a variable universal life insurance.
- Coverage can be lifetime or temporary
- Cash value accumulation is an interest crediting rate that can be linked to the percentage of change of an index
- Flexible premium
- Guaranteed death benefit is guaranteed for typically a timed period of 10-30 years
Option 3 - Variable Life Insurance
Variable Life Policies are designed to combine traditional protection and saving features of whole life insurance with the growth potential of investment funds. This is comprised of the general account and the separate account. The general accounts are the reserve account of the insurance provide and is not allocated to the individual policy, whereas, separate accounts are comprised of various investment funds within an insurance company’s portfolio. These include things like equity funds, money market funds, bond funds or a combination of them. This causes a fluctuation of the cash value and death benefit.
- Variable Universal Life Insurance combines features of universal life with variable life and give the policyholder the flexibility of adjusting premiums, death benefits and the selection of investment choices. These are commonly referred to as securities and are subject to Securities and Exchange Commissions (SEC). SECs are the oversights of the state insurance commissioner. The death benefit in this insurance policy may rise or fall that depends on the success of the policy’s underlying investments.
It's simple to get a Quick Quote for Life Insurance
Understanding how life insurance and the legal contents of it all works can be stifling. There are literally hundreds of options and just attempting to narrow them down to which policies you even qualify for or can afford can easily steal away hours, days or even weeks.
If you're interested in a streamlined, yet comprehensive, education about how you can best choose the right life policy for you, simply contact your local Compass Agency and we'll ask simple questions such as:
- Are you employed full-time
- Are you employed inside or outside the home
- Do you own a home
- Are you the caregiver for your spouse or children
- Have you recently married
- Do you have any children
- Have you recently retired
Having a specially trained life insurance agent ask all the right questions is essential to building a true and accurate account of just how much your family relies on you every day. Your live Compass insurance agent will then give you the options you need to decide precisely how much insurance you need and how to strategically build your life coverage to meet your current & future financial status.