Life Insurance

There are two types of insurance, Term and Permanent and each can solve either beneficiaries immediate or long term needs.

Personal Immediate needs would include funeral expenses, medical bills, debt and taxes. Long term needs will help the heirs continue the life they are accustomed to.

Life Insurance also allows Business needs to continue. Those funds can be used to replace a key person in the organization, to fund buy/sell agreements and provide collateral for business loans.

Term Insurance provides protection for a specified period of time usually 10 to 30 years and can automatically be renewed at the end of the coverage period. Some term insurance policies allow the policy holder to convert the term policy into a Permanent Insurance Policy without the need for a medical exam.

The advantage of Term Insurance is that premiums are lower than Permanent Insurance; therefore, you can afford to buy more coverage when you need it the most. Term Insurance is ideal for those individuals who require coverage for specific short term needs.

Return of Premium Term Insurance is a newly introduced type of insurance that provides one of the following options: either the death benefit or the return of the total insurance premium. Return of Premium Term Insurance is a convenient financial cushion as the insured or the indicated beneficiary is granted a financial reimbursement in either case.

Although there are clear benefits to purchasing a Term Policy there are also several disadvantages. There is no savings feature or cash value, only a death benefit. The premiums for term increase at each renewal date therefore making it more expensive later in life. You could also out live your coverage because term does not generally renew after the age of 70 or 75.

The second type of Life Insurance is called Permanent Insurance. Permanent insurance provides lifelong coverage as long as you keep paying your premiums. The premiums are based on your age at the time of purchase and generally remain consistent and do not increase with age. Unlike Term that has no cash value, permanent insurance accumulates a cash value which maybe refunded upon surrender of policy. The other benefit to this type of policy is that it usually can be borrowed against or used to pay premiums.

There are four types of Permanent Life Insurance.

Whole Life has a guaranteed rate and develops a cash value
Variable Life has a death benefit and a cash value but its benefit is usually related to the performance of a portfolio of investments. The death benefit and or cash value are not guaranteed but there might be a minimum death benefit
Universal Life is significantly more flexible. Within certain limits you can change the death benefit, the amount of premium, and payment frequency. This type of insurance is an interest driven policy which usually pays a guaranteed minimum. If the interest rates are continuously low additional premiums may have to be paid to avoid lapse of coverage
Variable Universal Life combines the premium and death benefit flexibility of universal life with the investment flexibility and risk of variable life

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