Life Insurance

Term Life Insurance

Term Insurance can be loosely compared to auto insurance.  It is for a specific period of time only – 10, 20, 30, or 35 years in most cases.  Payments do not change or increase while coverage is in place.  As long as the insurance premiums are paid, coverage is in place.  When this life insurance coverage is no longer desired, simply stop paying the premiums or cancel the policy.

Pros:

• Affordable:  This is the least expensive solution, especially for younger clients.
• Specific Term Only:  You get coverage for when you need it.  Need coverage to protect your children while they are still at home?  This is a great option.  Need coverage for your mortgage?  This is a very affordable solution.
• Level Payments:  Predictable, stable billing.  Payments can be monthly, quarterly, semi-annually, or yearly depending upon your desire.
• Fixed Benefit:  The amount paid upon death is fixed and does not decrease (or increase) over time.

Cons:

• Specific Term Only:  That’s right – a fixed time period of coverage can also be a con.  For example, if 20 years after you purchase the policy you need to extend coverage, you can’t.  You will need to obtain a new policy, at a higher rate since you are now older.  In the meantime should you have suffered an accident or developed a health issue, other coverage may not be available.
• Less Payment Flexibility:  Although term life insurance is quite affordable (we’ve seen quotes for a healthy 30 year old as low as $85 per year for $100,000 in coverage), you must pay premiums on time.  Most policies have a grace period, but if payment isn’t made, it is cancelled.

Options:

• Conversion:  Some policies allow you to convert to a permanent life insurance policy.  This option is typically available for a few years after the term policy is initially purchased only.
• Paid up:  An option where you pay a larger amount up front and then nothing thereafter.  Coverage remains in effect until the end of the term.

  Permanent Life Insurance

Universal Life

Universal Life Insurance is a type of permanent life insurance.  As long as you continue to pay the premiums, it will always be in effect.  It offers more flexibility than term in several ways.

Universal has the ability to build cash value in the policy.  All premium payments that are above the cost of insurance are credited to the cash value in the policy.  That means that it can be structured to be “paid up” after a certain period of time.  The cash value earns interest on a tax deferred basis and the death benefit is left to loved ones tax free.  The policy owner can also borrow money from the cash value of the policy if needed.  These loans, if not paid back, are simply reduced from the death benefit at the time of the insured’s death.

With this type of life insurance, the policy owner may choose a flexible premium to meet their budget and/or choose a flexible death benefit which may be increased or decreased as desired.  In general, universal life is more expensive than term, more flexible than term, and less expensive than whole life.

Fixed Index Universal Life Insurance

Fixed Index Universal Life (FIUL) is a specific kind of universal life insurance.  It offers death benefit protection, but it accumulates cash value based on positive changes in an external index (S&P 500, for example).  That gives it greater accumulation potential than traditional universal life.  A cash value floor is built-in so it will not decrease due to market volatility.  Thus, when the market goes up, the cash value increases.  When the market goes down, the cash value stays flat.  With FIUL the cash value is not directly invested in the market.

Whole Life Insurance

Whole Life is also a form of permanent life insurance and tends to be the most expensive.  It is similar to universal life but is less flexible.  The premiums do not change and it offers a guaranteed interest rate on the cash value.  With recent developments to universal life, whole life has become a less attractive option.  However, in some circumstances it is still the right choice.  Please Contact Us for details and information.