The way to benefit with life insurance is to make sure your life insurance policy is in force when you pass away.
Unlike Term Life, which is temporary, permanent life insurance stays in force until you pass away. Permanent policies can be used as an estate-planning tool with the added benefit of life insurance coverage. There are two main types of permanent policies, Whole Life and Universal Life.
Permanent Polcies are not right for everyone. They are often pushed on to clients for the wrong reasons. Permanent Policies are complicated products and you need an honest and knowledge firm to help you evaluate them.
Permanent Life is typically more expensive than Term Life insurance.
Whole Life, also called “Ordinary Life” or “Straight Life”, is a policy that will remain in force until you pass away as long as you pay your required premiums.
Premiums are paid throughout the life of the policy or you can get a limited pay policy, which requires premium to be paid for a shorter time period, such as 10 or 20 years. The policy will remain in force after the initial payment. No further payments required after the initial payments.
Premiums can be structured to remain level, so not to increase. As you pay premiums, you will accumulate a cash value, which can be redeemed, borrowed against and will grow tax-free.
The cash value will continue to grow and can never go down in value. It can provide a safe tax-deferred option.
Death benefits are usually tax-free.
Universal Life is the most flexible of policies. It allows you to adjust your premium and death benefits dependent on your changing life goals.
When you pay more premium than the cost of insurance, you accumulate a cash value. This cash value can be invested, redeemed, borrowed against. If you cannot afford to pay your premium, Universal allows you flexibility to help. However, adjusting your premium payments can have long-term consequences that need to be considered. Raising premiums can increase your cash value or death benefits, lowering premiums may reduce your death benefits.
Similar to Universal life, it had the added benefit of allowing the cash value to be directed into a number of separate accounts that operate like Mutual funds, bond funds, with greater return and risk potential.
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