Life Insurance

Life insurance provides financial security for your family by providing a lump sum of tax-free money after your death. This money, also called the death benefit, can help your family meet important financial needs by replacing the income you would have provided. Life insurance can also help with expenses incurred at the time of death, such as medical bills, burial costs, and estate taxes. Read on for more information about life insurance, or request a quote at any time.

The main difference between term life insurance and permanent life insurance is simple: term life insurance covers you for a specific time period, or term, while permanent life insurance covers you for your entire life. There are several types of permanent life insurance - whole life, universal life, and variable life. See Types of Life Insurance for a more detailed discussion of the different kinds of life insurance.

Term

Term life insurance covers you for a specific period of time, called a term, instead of for your entire life. Common terms are 1, 5, 10, 20, and 30 years. This type of life insurance pays death benefits only if you die during the period of coverage, and does not accumulate cash value. People often purchase term life insurance to cover shorter-term debts like a mortgage or car loan. While term life premiums are usually lower than permanent life premiums, they increase as you get older. Term life can include the option to convert to permanent life insurance in the future.

Permanent

Permanent life insurance covers the entire life of the insured person. Different types of permanent life insurance include whole life, universal life, and variable life. As long as you pay your premiums, your beneficiaries will receive the death benefit when you die.

 This type of insurance also combines death benefits with the opportunity to build savings tax-deferred. Part of your premium payments are invested by the insurance company on your behalf. This builds up a cash value, which you can use in several different ways. You can take out a loan against the cash value of your policy, use the cash as extra retirement income, or subsidize expenses like college tuition. You may also be able to cancel, or surrender, the policy and receive the cash value as a lump sum. With all permanent life insurance policies, the cash value is different from the policy's face amount. Cash value is the amount available if you surrender a policy, while face amount is the money paid by the insurance company at your death.

 Premiums for permanent life insurance are generally higher than term life insurance because of the cash value. However, the younger you are when you buy the policy, the lower your premiums will be.

Whole

Whole life insurance is in effect for an insured person's entire life. The amount of your premiums generally remains the same over the life of the policy and must be paid periodically for coverage to continue. The insurance company invests part of your premium in its general portfolio to build the cash value of your policy. The most common type of permanent insurance, whole life policies have a fixed guaranteed rate and guaranteed cash values.

Universal

Universal life insurance covers the entire life of the insured, as long as the premiums are paid. Premiums are split two ways: part of the premium covers the cost of the policy, and the remainder is invested in the insurance company's general portfolio to earn interest tax-deferred. This type of insurance usually guarantees a minimum interest rate on the balance that is invested. After your first premium payment, you can pay premiums at any time, in any amount that meets your policy's required minimum and maximum payment. You can also reduce or increase the death benefit more easily than with a whole life policy.

Variable

Variable life insurance is a type of whole life insurance that incorporates investing. You can invest your premiums in the stock, bond, and money market funds you choose from the insurance company's portfolio. While the cash value of variable life policies is not guaranteed, you have control over how your money is invested. The cash value and death benefit of your policy is determined by how well your investments are doing. This type of life insurance usually has fixed premiums.

Equity indexed universal life insurance

Equity indexed universal life (EIUL) insurance, sometimes called index universal life insurance is a policy with an insurance carrier designed to provide protection for a consumer’s entire life. The premium payments are flexible, similar to other universal life insurance policies. These equity indexed universal life insurance policies have cash value accumulation, which grows tax deferred. They provide interest credits to the cash value account based on the underlying performance of an index; i.e. S&P 500. Cash value would be surrendered to the insurance carrier upon the death of contract holder and the beneficiary will receive the death benefit.

Below get the answers to some common questions about life insurance. For more detailed cost and policy information, you can request a quote at any time.

Q: Who should consider life insurance?

A: If you have others depending on you for support, you probably need life insurance to help them cover expenses and meet future needs. Your beneficiaries can use the death benefit to take the place of your salary, pay for expenses such as day care and tuition, and pay off a mortgage, car loan, or other debts. In addition, people often buy life insurance to help pay expenses at the time of death, such as estate taxes, burial costs, and medical bills.

Q: How much life insurance coverage do I need?

A: A rule of thumb is to buy life insurance equivalent to five to eight times your annual gross income. You should also consider individual factors such as income potential, ordinary expenses, extraordinary expenses, and federal estate taxes.

Q: Will my beneficiaries have to pay income tax on the death benefit?

A: No. Death benefits are tax-free to your beneficiaries. However, if your beneficiaries die before you do, the death benefit will be paid to your estate and may be subject to estate taxes. That's why it's important to keep your beneficiary information up-to-date. It's also a good idea to name a secondary, or contingent, beneficiary in case you outlive your primary beneficiary.

Q: If I don't have any dependents, do I still need life insurance?

A: Even if you have no dependents now, you can lock in lower premium rates for permanent life insurance by buying a policy while you're young. Premium rates are generally determined by age - the younger you are when you buy your policy, the lower your rates will be.

Q: How much will my premiums be?

A: Premium amounts vary from policy to policy. Because premium rates are generally determined by age, the younger you are when you buy your policy, the lower your rates will be. For more specific information about policy costs, request a quote.