More than just Life Insurances
Life insurance is one of the most important things you could ever purchase in your life, but what else are there? Many people purchase life insurance not only to protect their loved ones, but for a number of other reasons. There are many different types of policies that can provide a different level and type of coverage, and this post will help highlight some of them so you know which type might be right for you.
This article will cover:
-Term Life Insurance
-Universal Life Insurance
-Riders on a policy
-Non-Life Insurance Solutions (i.e. Critical Illness Insurance, Disability Insurance, Long-Term Care and more.)
Life insurance covers you for short term or long term needs.
There are many different reasons for having a life insurance plan. Some reasons might include:
If you have a family to support and don't want them to have financial burdens after you're gone. To provide an income tax free death benefit (cash value) to loved ones when they need it most. For estate planning with proper allocation of assets during your lifetime or on death. As a means of reducing estate taxes (we can work with your CPA to structure the policy). For protection from creditors in the event of an unexpected death. To provide funds for health care expenses in the event of an accident.
There are many different types of policies available today, but not all of them will address your personal needs. Below we'll be going into more detail on some of the "different types" to help determine what might work best for you:
Term Life Policy - provides basic coverage at a low cost and is typically used to provide protection against premature death for a specified time period (term). Term policies are great for covering short term needs but should not be purchased as a long term solution since they do not build equity over time like other policies.
Universal Life Policy - provides a combination of death and cash value benefits. They are typically more expensive than term policies, but can provide a tax-advantaged savings vehicle to accumulate cash value over time. They are more flexible than Term Policies but should still be used for short term protection since they do not build equity over time like other policies.
Universal Life policies can be converted to a Cash Value option within the policy for certain types of Universal Life Policies.
Most universal life policies offer conversions to both whole and universal life at certain times. Here is an example: John has a universal life policy with $40,000 in cash value. The policy has a current death benefit of $300,000 and a current cash surrender value of $0. John realizes that he is going to need more protection than what his current policy provides, so he decides to convert the policy to a Whole Life Policy. John's Universal Life Policy is converted into a Whole Life Policy with a guaranteed death benefit of $300,000 and an additional $10,000 in cash value. The conversion was done at the time of sale (a surrender charge applied).
Riders - Riders are special provisions attached to an insurance contract that provides additional benefits above and beyond standard coverage. This type of contract modification can be added during the initial term or any time thereafter. Riders can be a valuable option for certain situations.
Various types of riders are available for any type of policy: Accidental Death Benefit, Accidental Dismemberment, Critical Illness, Waiver of Premium, Waiver of Interest, Conversion to whole life and many more.
A rider is just one example of how you can customize your coverage to fit your specific needs. When looking at different riders that may be available on a policy it's important to look at the terms and conditions that are associated with them as well as the premiums associated with each rider.
Disability Insurance - provides income replacement in the event you are unable to work due to disability. Disability policy premiums are generally tax-deductible and are relatively inexpensive since the likelihood of a disability occurring is relatively low.
A disability waiver of premium provision may be included on your policy which would allow you to forgo your monthly premiums when you become eligible for Social Security Disability Insurance or Railroad Retirement Disability benefits.
High Deductible Health Insurance - provides coverage above and beyond the standard medical insurance coverage offered by a high deductible health plan. It can be used in conjunction with a high deductible health plan to fill the gaps in medical care that are not covered by traditional medical plans at an affordable price.
Income Protection Insurance - provides income replacement in the event that you are unable to work due to an accident or illness.
Life Insurance is one of the most important things you could ever purchase in your life, but what else are there? There are many different types of policies that can provide a different level and type of coverage, and this post will help highlight some of them so you know which type might be right for you.
Life insurance covers you for short term or long term needs.
There are many different reasons for having a life insurance plan. Some reasons might include:
If you have a family to support and don't want them to have financial burdens after you're gone. To provide an income tax free death benefit (cash value) to loved ones when they need it most. For estate planning with proper allocation of assets during your lifetime or on death. As a means of reducing estate taxes (we can work with your CPA to structure the policy). For protection from creditors in the event of an unexpected death. To provide funds for health care expenses in the event of an accident.
There are many different types of policies available today, but not all of them will address your personal needs. Below we'll be going into more detail on some of the "different types" to help determine what might work best for you:
Term Life Policy - provides basic coverage at a low cost and is typically used to provide protection against premature death for a specified time period (term). Term policies are great for covering short term needs but should not be purchased as a long term solution since they do not build equity over time like other policies.
Universal Life Policy - provides a combination of death and cash value benefits. They are typically more expensive than term policies, but can provide a tax-advantaged savings vehicle to accumulate cash value over time. Universal life policies provide flexibility but should still be used for short term protection since they do not build equity over time like other policies.
Universal Life policies can be converted to a Cash Value option within the policy for certain types of Universal Life Policies. Most universal life policies offer conversions to both whole and universal life at certain times. Here is an example: John has a universal life policy with $40,000 in cash value. The policy has a current death benefit of $300,000 and a current cash surrender value of $0. John realizes that he is going to need more protection than what his current policy provides, so he decides to convert the policy to a Whole Life Policy.
Conclusion - The bottom line is that life insurance is a very important part of your overall financial plan and it should be considered as such. A good insurance professional can help guide you in the right direction and help make sure you have the right amount of coverage at the right price.
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