Life Insurance

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Term Life Insurance | Types of Life Insurance | Whole Life Insurance | Universal Life Insurance | Variable Life Insurance | Second to Die | Determining Your Needs | Beneficiary Designations | Settlement Options | Benefits of Whole Life | Term Life Benefits

Term Life Insurance

Insurance for the masses: Term life insurance. It's cheap and virtually everyone can afford it today. Here are the details.

Term life insurance provides protection for a specified period of time. A death benefit is paid to the beneficiary if the insured dies within a specified period of time while the policy is still in force. Many term life insurance plans can be converted to permanent life insurance plans without evidence of insurability. Two types of term life insurance are yearly renewable term and level premium term.

Yearly renewable term life insurance has premiums that are initially low; however, the premiums increase substantially as the insured gets older. These plans have diminished in popularity due to the introduction of level premium term life insurance.

Level premium term life insurance has premiums which remain level over a specified period of time. These plans have premiums that remain level for a period of 5, 10, 15, 20, 25, and 30 years. After the initial level period expires, the annual premium increases each year, subject to a guaranteed maximum.

When obtaining term life insurance the underwriters usually require a physical or blood test. Smokers and those with health problems may want to look into other options for best price.

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Types of Life Insurance

Term life and whole life are the most common life insurance types. Here are others...

Before you buy life insurance make sure you know all your options. Insurance will vary in payoff methods, cash out, and premiums. We've created a page for different types of insurance to give you the full details of each kind.

Keep in mind that insurance policies, names, premiums, etc will change with different companies.

Some common names of insurance types include:

• Term Life Insurance (Term Life)

• Whole Life Insurance

• Universal Life

• Variable Life

• Variable Universal Life Insurance

• Second-to-Die or Survivorship Life Insurance

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Whole Life Insurance

For a long term option and protection - take a look at whole life insurance policies.

Whole life insurance is permanent life insurance and provides protection for life. As long as premiums are paid, a death benefit is paid to the beneficiary. The premiums for whole life insurance policies are designed to remain level over time. In addition, these policies accumulate cash values on a tax-deferred basis. The rate of return on whole life insurance cash values is dependent upon a number of factors including the results of an insurance company's investment performance. Cash values can be used for a variety of options:

The policy can be surrendered at anytime for the cash surrender value.
The policy owner can take out a loan and use the cash value as collateral.
The policy can be changed to a reduced death benefit amount that is paid up.
The cash values may be used to pay premiums for a certain period of time.
The cash surrender value can be used to supplement retirement income.

Whole life insurance policies are valuable because they provide permanent protection and accumulate cash values that can be used for emergencies or to meet specific objectives.

The cash values of whole life insurance policies may be affected by a life insurance company's future performance. Some factors that influence a life insurance company's performance are expenses, mortality experience, and investment performance.

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Universal Life Insurance

Universal life insurance is permanent life insurance. As long as premiums are paid, a death benefit is paid to the beneficiary.

These policies are different from whole life insurance policies because they offer the policy owner some flexibility to change the premium payments and death benefit. The death benefit may be increased subject to insurability or decreased, and the premiums can also be increased and decreased as well as skipped. Universal life insurance policies may be purchased with one of two different death benefit options. One is a level death benefit and the second is an increasing death benefit. Although premium payments are flexible, a universal life policy will usually have a target premium which is the suggested annual premium payment. The target premium for some companies is sufficient to keep the policy in-force to age 100; however, this is not guaranteed. Universal life insurance policies also accumulate cash values on a tax-deferred basis. These cash values tend to be interest-sensitive and can be used for a variety of options:

The policy can be surrendered at anytime for the cash surrender value.
The policy owner can take out a loan and use the cash value as collateral.
The policy can be changed to a reduced amount paid-up whole life policy.
The cash values may be used to pay premiums for a certain period of time.
The cash surrender value can be used to supplement retirement income.

Universal life insurance policies are valuable because they can provide permanent protection and accumulate cash values that can be used for emergencies or for meeting specific objectives. For those who prefer flexibility, universal life insurance provides more options than whole life insurance.

The cash values of universal life insurance policies may be affected by a life insurance company's future performance. Some factors that influence a life insurance company's performance are expenses, mortality experience, and investment performance.

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Variable Life Insurance

Variable universal life insurance is permanent life insurance. As long as premiums are paid, a death benefit is paid to the beneficiary.

These policies are different from variable life insurance policies because they offer the policy owner some flexibility to change the premium payments and death benefit. The death benefit may be increased or decreased, and the premiums can also be increased and decreased as well as skipped. Variable universal life insurance policies may be purchased with one of two different death benefit options. One is a level death benefit and the second is an increasing death benefit. In addition, these policies accumulate cash values on a tax-deferred basis with the potential for higher rates of return than traditional whole life policies. The cash values of variable universal life insurance policies vary with the investment results of funds chosen by the policy owner. The policy owner is given a choice of investment options which are usually stock, bond and money market funds. Unlike universal life insurance policies which have guaranteed cash values, the cash values of variable universal life insurance policies are not guaranteed. The cash values of variable universal life insurance policies can be used for a variety of options:

The policy can be surrendered at anytime for the cash surrender value.
The policy owner can take out a loan and use the cash value as collateral.
The cash values may be used to pay premiums for a certain period of time.
The cash surrender value can be used for retirement income.

Variable universal life insurance policies are valuable because they can provide permanent protection and may accumulate cash values; however, these policies carry more risk than traditional universal life insurance policies. Individuals considering purchasing a variable universal life insurance policy should be experienced investors in equity investments.

The cash values of variable universal life insurance policies may also be affected by a life insurance company's future performance. Some factors that influence a life insurance company's performance are expenses and mortality experience.

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Second to Die

A second-to-die life insurance policy insures the lives of two people, typically a husband and a wife. Also called survivorship life insurance.

The death benefit is not paid to the beneficiary until the death of the second insured. These life insurance policies are generally available as either whole life insurance or universal life insurance policies, and premiums are often less expensive than buying two life insurance policies.

Second-to-die life insurance policies are effective tools often used by wealthy individuals in estate planning. They can be used to pay for estate taxes. By removing the proceeds of a life insurance policy through the use of gifting policies and third party ownership, a life insurance policy can be used to pay for estate taxes. Careful planning by your tax and legal counsel, coupled with a properly structured second-to-die life insurance policy, can help you preserve your net worth.

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Uses of Insurance

When looking into life insurance make sure you look at your uses and needs of life insurance.

Here are some common uses of life insurance:

Funeral

Life insurance proceeds can ensure that there is enough money for proper funeral and burial expenses.

Debt

Personal bills, credit card debt, student loans, and personal notes can be covered by life insurance in the event of an individual's death.

Mortgage Protection

The proceeds of a life insurance policy can pay off the balance of a mortgage or provide an income stream to pay monthly mortgage or rent payments.

Income Replacement

In the event of an individual's death, life insurance proceeds can provide a supplemental income stream to ensure that the surviving family members are able to maintain the same standard of living.

Education

Life insurance proceeds can ensure that the education costs of the insured's children are covered.

Taxes

Federal estate and state inheritance taxes can be pre-funded using life insurance to preserve the value of an estate.

Donations/Gifts

An individual can use a life insurance policy to fund a donation to a charity or leave a gift to a family member.

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Determining Your Needs

When purchasing life insurance you must assess your needs to know what kind of insurance plan will meet those needs.

Here are some common needs for life insurance:

Final Expenses

These could be unpaid hospital bills, funeral expenses, unpaid debts, probate costs, and estate and inheritance taxes.

Readjustment Fund

This may be used to cushion the immediate lifestyle adjustment that a family must make when a loved one dies. The family may be forced to move, or the surviving spouse might have to look for a new job. In addition, a working spouse may find it difficult to return to work immediately after the death of a partner. The readjustment fund allows for adequate bereavement due to loss.

Supplemental Income

After the readjustment period, there should be a consistent income stream to help pay for the family's living expenses, such as mortgage payments, monthly bills, and daycare.

Educational Funds

Adequate funds should be available for the children's education. This might include elementary school, high school, and college.

Retirement Fund

There should also be adequate funds available to ensure that the spouse can retire comfortably.

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Beneficiary Designations

You've decided on a plan, but who gets the life insurance when you die? Some things to know about life insurance beneficiaries.

A beneficiary is a person or entity named to receive a portion of the death benefit of a life insurance policy. The owner of a life insurance policy may name multiple beneficiaries, and most insurance companies permit the policy owner to change beneficiaries.

There are two types of beneficiaries: primary and contingent. A primary beneficiary has the first claim to the proceeds of a life insurance policy should the insured die. There may be more than one primary beneficiary and the proceeds do not have to be shared equally. The policy owner of a life insurance contract may also name a contingent or secondary beneficiary. The contingent beneficiary has claim to a portion of the death proceeds should the primary beneficiary(s) be removed or die prior to the death of the insured. There may also be more than one contingent beneficiary.

Many individuals designate a spouse as the primary beneficiary of their life insurance policy and the children as contingent beneficiaries. You should consult with an estate-planning attorney prior to making a minor child a beneficiary of a life insurance policy. In addition, anyone contemplating making their estate the beneficiary of their insurance policy should use extreme caution and consult with an estate planning attorney prior to doing so.

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Settlement Options

Life insurance settlement options? The life insurance policy owner may designate a specific settlement option to be paid upon his or her death.

If the policy owner does not choose a specific option, the beneficiary(s) will be given a number of choices. These usually include:

Lump Sum Payment:

The death proceeds of a life insurance policy are paid to the beneficiary(s) in one lump sum payment.

Fixed Period Payments:

The death proceeds of a life insurance policy are paid to the beneficiary(s) for a fixed period.

Life Income with Installments Certain:

The death proceeds of a life insurance policy are paid to the beneficiary(s) in installment payments through a certain period. After the certain period, payments will continue to be made throughout the beneficiary's lifetime but the payment may vary from the payments during the certain period.

Interest Payments:

The death proceeds of a life insurance policy remain with the insurance company and the company pays the beneficiary interest payments.

Fixed Installments:

The death proceeds of a life insurance policy are paid to the beneficiary(s) in fixed installments until the proceeds and interest on the unpaid balance of the proceeds are exhausted.

Single Premium Annuity:

The proceeds of a life insurance policy are used to purchase a single premium annuity from the insurance company.

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Benefits of Whole Life

Whole Life Insurance : There are different kinds and your friends are telling you what to do. Here's the juice!

Whole life insurance means...

• Permanent protection that can never be canceled as long as you pay your premiums.
• A level premium that is guaranteed never to increase.
• A guaranteed death benefit, generally free from federal income tax.
• Tax-deferred cash value accumulation.
• The potential to earn dividends. (Dividends are not guaranteed.)

Why whole life insurance?

Whole life insurance provides basic insurance protection, plus...

Mortgage protection:

Benefits can be used to help pay off mortgages and other outstanding debts in the event of a premature death.

Estate preservation:

Whole life insurance can provide funds to cover estate expenses and help avoid the need to sell assets and or borrow money to cover these expenses.

Retirement funding:

Cash values can be accessed through policy loans or surrenders to supplement a retirement income. Loans will reduce the death benefit.

Charitable giving:

A whole life insurance policy can enable you to make a significant donation to your favorite charity upon your death.

Business needs:

Whole life can be an attractive executive and employee benefit and a means to assure a business's financial future.

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Term Life Benefits

Term Life Insurance : It's dirt cheap if you're relatively young and healthy.

Term life insurance is probably the most basic form of life insurance. It usually provides affordable protection, often with a guaranteed premium, for some period of time. If the insured should die while the policy is in force, the face amount is paid to the named beneficiary. At the end of the premium guarantee period, the insured can renew the coverage at a higher premium. The premium for term insurance is initially lower than a comparable permanent insurance policy; however, it can increase at each renewal. This initial lower premium usually makes term insurance an ideal choice for individuals with a temporary need for life insurance protection.

Terms can include as little as 5 years up to 20+ years. Also available are term life plans for up to the age of 90 years.

*** The benefits of term life insurance include the cost and the fixed term of the insurance coverage.

*** Term life insurance quotes are typically free to the consumer.

***Term life insurance usually requires a medical exam or blood test by a nurse or doctor.

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