Life Insurance

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Life insurance provides cash to your beneficiary after your death. This cash (known as the death benefit) can help a family meet many important financial needs like mortgage, child care assistance, living expenses and college tuition.

Life insurance can be a vital step in planning for your future and the care of your loved ones. Life insurance can also provide benefits while you are living.

Advantages of the Death Benefit

  • Provides income tax-free money to your named beneficiary(s) that can be used to pay funeral expenses, debt, tuition, estate taxes or virtually any financial needs of your beneficiary.
  • Can provide business security by enabling partners to buy out the interests of a deceased partner and help prevent a forced liquidation.

Advantages of Living Benefits

  • The cash value growth of a permanent life insurance policy is tax-deferred1, which means you do not pay taxes on the growth of the cash value unless the money is withdrawn.
  • Loans2 or withdrawals can be taken against the cash value of a permanent life insurance policy to help with expenses, such as college tuition or the down payment on a home.

1Accumulated growth may be taxable upon withdrawal. If the policy is a Modified Endowment Contract (MEC), tax penalties may apply. Consult a tax advisor on your specific situation.
2Policy loans and withdrawals reduce cash value and the death benefit and may be subject to other charges outlined in the contract.

Assessing Your Need

The amount of life insurance you select should be dependent on your personal and financial needs. An analysis can help determine an appropriate coverage amount and to help you decide on which type of life insurance is right for you. Generally, you should consider life insurance if you have:

  • A spouse
  • Dependent children
  • Aging parents or a physically-challenged relative who depends on you for support
  • Retirement savings that are not sufficient to ensure your spouse’s future financial well-being
  • A sizable estate
  • A business

Types of Life Insurance

There are several different types of life insurance products available. The most common include:

Term Life Insurance
Term provides life insurance protection for a specified period of time. If you do not currently have life insurance, term can be a good place to start. It’s generally less expensive than permanent life insurance, and is available in varying term periods with fixed premiums from a one-year (annual renewable term) to 20-year period (level term). Furthermore, term insurance is sometimes convertible to permanent coverage, providing you with flexibility as your needs change.

Permanent Life Insurance
There are several different types of permanent life insurance. The type that is right for you depends on your goals and objectives and risk tolerance. Permanent insurance is designed to last as long as the insured person lives, or an age such as 65 or 100. Usually, the premiums are level and don’t increase after a certain period, like they would for a typical term policy. The premiums are higher than those of a term policy. The excess premiums collected are set aside in a cash value account which increases over the years. Permanent life insurance is a solution for long term needs.

Whole Life Insurance
Whole life is a form of permanent life insurance that remains in force during the insured person’s lifetime, provided premiums are paid as specified in the policy. Some benefits of Whole Life Insurance are:

  • Can build cash value
  • Guaranteed premiums and death benefits
  • Guaranteed minimum interest rate

Universal Life Insurance
Universal life is a form of permanent life insurance characterized by its flexible premiums, flexible face amounts and unbundled pricing structure. Universal life can build cash value, which earns an interest rate that may adjust periodically, but is usually guaranteed not to fall below a certain percentage. Benefits of Universal Life Insurance are:

  • Can build cash value by crediting premium payments and interest after expenses are deducted
  • Variable interest rate
  • Policy owner may vary the timing of premium payments and the death benefit

Guarantees are based upon the claims paying ability of the issuing company.

These insurance definitions are generic in nature and not specific to any policy. The actual terms
and definitions will be dependent upon the policy for which you apply.