Life insurance can be an important part of your personal safety net, especially if you have financial dependents.
Permanent Life Insurance
What is it?
Permanent insurance, including Whole Life Insurance, and Universal Life Insurance can help provide protection for your entire lifetime, or in certain instances up to a specific age-at which point the insurer pays the policy owner the cash value.
Account Who's it for?
People who...May need life insurance for a long term.
Benefits:
Over time, permanent insurance may be more economical than term insurance since premiums do not increase with age and the policy can build a cash value.
If you cancel the policy, the accumulated cash value, minus any surrender charges, is yours to use as you wish.
Things You Should Consider:
Permanent insurance may be initially more expensive than term insurance.
Loans, including any unpaid loan interest,and cash-value withdrawals generally reduce the death benefit, which could leave beneficiaries inadequately protected.
If you cancel or surrender the policy, or it lapses,you may have taxable income to the extent that the total of cash value and/or distributions or withdrawals exceed your basis in the policy.
Term Insurance
What is Term Life Insurance?
Term life insurance is generally the least expensive and least complicated type of life insurance.It provides insurance protection for a specified period of time,such as 10,20 or 30 years. If you die within the term period and the policy is in force,a death benefit is paid to your beneficiary. If you are still livingat the end of the term, protection ceases unless your term life insurance policy is renewed. There is no "accumulation" element,or cash value with term life insurance.
Who's it for?
- People with a temporary need for life insurance protection.
- Those who need a large amount of insurance protection but have limited budgets.
- People with specific business needs (e.g.. business owners who want to cover the life of a key employee who has a set number of years until retirement)
Benefits of Term Life Insurance:
It may provide insurance protection for a low cost (at least initially).
If your needs change, most term life insurance policies may allow you to convert to a permanent life insurance policy without having to take a medical exam or provide other information about your health.
Term life insurance is a good way to supplement other coverage when you have added financial responsibilities for a given period of time (e.g.. mortgage, college expenses).
Things You Should Consider:
Premiums generally increase with age and they could become unaffordable later in life. There is no cash-value element with term life insurance,so you miss the tax-deferred growth of the cash value of permanent life insurance policies, such as Whole Life Insurance.
Once the term period expires, unless you renew your policy,the insurance coverage ceases and the policy has no further value.
Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender periods. Please keep in mind that the primary reason to purchase a life insurance product is the death benefit
The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications
