No longer your fore-parents’ death plan, today’s life insurance is also about living for today and is designed with your livelihood and lifestyle in mind. There are different types of life insurance, but typically only two main categories – Term and Permanent.
Life insurance is a vital part of every solid financial plan. It’s generational. Find peace of mind in protecting what matters most. It’s important to speak with the right financial advisor. Our team of iAgents can help you understand which type of coverage is best for your personal and your business needs.
Term v. Perm
Here’s an idea for comparison: Term insurance is like renting an apartment. You have a shelter, but it builds no equity. Permanent insurance is like buying a house. You have a shelter (most likely bigger and nicer) and it builds equity, which you can use for greater benefit. On display, perm shows off some amazing designs, like living benefits, dividends, self-banking concepts, and so much more.
In short, whether Term or Permanent, life insurance is a promise between you (the policy owner) and an insurance company. When you pay a certain amount of money (premium) to the insurance company, the insurance company will pay a certain amount of money (death benefit) to the person (beneficiary) you designate in the event the person whose life is being insured dies.
That’s a great question and to answer fully would take much more time, which we can do over a cup of your favorite brew! For now, Term insurance is perhaps the most affordable (especially when you’re younger) because it only provides a death benefit (a fixed amount of money) for a limited period (term) of time. With Term insurance, its value is wrapped up in the death benefit, which pays out only if the insured dies during the limited period (term). Usually after the term expires, it can get quite a bit more expensive as you’ve gotten a bit older (10, 15, 20 or so years) and health might have changed, among other factors.
On the other hand, Permanent insurance can provide a death benefit and the potential to build policy cash value that you can access during your lifetime using policy loans and withdrawals.1 Permanent insurance can also offer the flexibility to increase or decrease your death benefit as your needs change, as well as the potential to reduce or skip premium payments.2
Because some people may die younger, while others are living longer or becoming disabled, based upon your specific needs and on which type you choose, life insurance is the unique product that:
- Covers final expenses and relieve financial burdens as your loved ones cope with the emotional stress
- Pays tax-free benefits to beneficiaries
- Offers living benefits (for chronic, terminal and critical illness/injury)
- Has upside potential and downside protection
- Provides tax-free retirement income
- Immediately increases your net worth
- Eliminates debt (in most cases 9 years or less, including mortgage, school loans, credit cards, etc.)
- Protects your family’s home in case of death or severe injuries/illness resulting in loss of income
- Funds college education (see how much a traditional plan can cost)
- Offers employer group coverage
- Is a must-have in business succession planning and key employee protection
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- Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Withdrawals up to the basis paid into the contract and loans thereafter will not create an immediate taxable event, but substantial tax ramifications could result upon contract lapse or surrender. Surrender charges may reduce the policy’s cash value in early years.
- It is possible that coverage will expire when either no premiums are paid following the initial premium, or subsequent premiums are insufficient to continue coverage.
- A level of protection may be provided by benefits that are either built into the contract or through optional riders at an additional cost.
- With the purchase of any additional-cost riders, the contract’s value will be reduced by the cost of the rider.
- Additional guidelines and regulations apply. Speak in-depth with a qualified financial professional before purchasing a life insurance or annuity product.
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