Why Life Insurance?
In the event of a tragedy, life insurance proceeds can help cover everyday expenses, like the mortgage and household bills. The cash received from a policy (the death benefit) can help protect your family from being burdened with debt. In addition to helping meet your family’s immediate financial needs, life insurance can also be used to help keep a business thriving, help finance future needs like your children’s education or supplement your retirement funds.
You may know the distinct pride you get in purchasing your own home or car. Ownership can give a certain comfort, a certain satisfaction that your financial stability is solid, secure, and even permanent. Wouldn’t you like to feel that way about your family’s financial future – even if you weren’t around to provide for them? When you purchase life insurance, you select a plan that provides the right kind of protection for your family.
Types of Life Insurance:
Term
Term insurance is often a good choice for your family in earlier years, especially if the budget is tight, because it allows for affordable, yet high levels of coverage, when the need for protection is often greatest. Term insurance is also a good option for covering needs that aren’t permanent. For instance, paying for college is a major financial concern for many families, but if you don’t need life insurance coverage after the kids graduate, then it might make sense to buy a term policy that’ll get you through the college years.
Term insurance can provide low-cost coverage for a specific period of time (the “term”)—most likely during an individual’s peak earning years when death can cause the greatest financial hardship. Generally the most affordable type of insurance when initially purchased, term insurance is designed to meet temporary needs. It provides protection for a specific period of time (the “term”) and generally pays a benefit only if you die during the term. This type of insurance often makes sense when you have a need for coverage that will disappear at a specific point in time. For instance, you may decide that you only need coverage until your children graduate from college or a particular debt is paid off, such as your mortgage.
If you buy a term policy and then later realize that you still have a need for life insurance, you can either renew your term policy or (depending on the insurance policy’s rules about conversion) convert it to a different type of policy. If, in ten, 15 or 20 years you’re still healthy according to the company’s standards, you might re-qualify at a reasonable rate. But if your health has deteriorated, you may find that it’s too expensive to renew your policy or you may not even re-qualify.
So, when considering a term policy, be sure you carefully consider your needs and how they may evolve, financially, down the road. If your needs will remain temporary, then term insurance may be right for you. But, if you think there’s a possibility that you might need the coverage for a long time, then remember that renewing your term policy after it expires or buying a new term policy at that time, may make coverage more expensive due to your age, health status or other factors.
Want to learn more? Contact us to find a North American representative near you!
Permanent
Unlike term insurance, which addresses more temporary needs, permanent life insurance is designed to provide life-long financial protection. Because permanent life insurance policies are designed and priced to keep over a long period of time, this may be the right type of insurance for you if you have a long-term need for life insurance coverage. “Permanent insurance” is generally a catchall phrase for a wide variety of life insurance products many of which include a cash-value feature. Within this class of life insurance, there are many different products, including universal life insurance and indexed universal life insurance.
Despite what many people may think, the need for life insurance often remains long after the kids have graduated college or the mortgage has been paid off. If you died, your spouse would still be faced with daily living expenses. And if your spouse outlives you by ten, 20 or even 30 years—would your spouse be able to maintain the lifestyle you worked so hard to achieve, without the death benefit of life insurance? Would you be able to pass an inheritance on to your children or grandchildren? These are questions to consider carefully when determining what type of life insurance fits your needs.
Want to learn more? Contact us to find a North American representative near you!
Universal
Universal life (UL) offers flexible premiums that can give you the option to make higher premium payments when you have extra cash on hand or lower premium payments when money is tight. Once the policy has enough cash value, the flexibility of UL insurance generally allows you to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums of the policy guidelines. You also can reduce or increase the death benefit (which may reduce or increase your premium payment) should your needs change.
In addition to the death benefit, another important characteristic of universal life insurance is a feature known as cash value or cash-surrender value. These types of policies can earn interest and build cash value over time, as well as provide a death benefit to your loved ones.
When you pay your premium, administrative fees, applicable rider charges and other insurance costs are deducted from the amount you paid. The balance of your payment is applied to your cash value account, and continues to build with each premium payment. The cash value account may also earn a current interest rate offered by your insurance carrier. Generally, over time your policy can develop a cash value available to you in the form of a policy loan2 or partial surrender.
Benefit features like a No-Lapse Guarantee1 can be very useful to help protect your policy. With an ordinary universal life product, the policy could lapse under certain circumstances (e.g., interest rates fall below projections, insurance costs or administrative expenses rise, etc, which can affect your ability to make premium payments). With a No-Lapse Guarantee, you’re guaranteed that the policy won’t lapse for a specified period of time as long as premium payments are made within the time frame outlined by the company.
Indexed Universal Life Insurance
Indexed universal life insurance (IUL) is permanent life insurance that offers death benefit protection when loss of life occurs. Like other forms of permanent life insurance, your premium payments may earn interest and grow the cash values of your policy.
What differentiates IUL from other permanent life insurance is the way interest is credited to the policy. In addition to the company offering its own declared interest rate, IUL also offers an interest option linked to the movement of a selected stock market index over a specific period of time.
The manner in which interest is credited to your IUL policy gives you the potential for strong cash value accumulation. A key benefit to remember is that it offers protection in a poorly performing market. With IUL, you don’t participate directly in the stock market and the credited interest rate is never less than zero percent, guaranteed!
