LIFE INSURANCE- Education is NOT filling a Basket but LIGHTING the Fire.
Some basic facts you need to know about Life Insurance.
-It is generally recommended that you should have Life Insurance worth at least 10 times your Gross Pay.
-Life Insurance can be used to solve Liquidity issues at your death, maintain the life style of your loved ones or provide income for your loved ones.
-Women and the young will pay premiums that are less than their male or older counterparts.
-If you misstate your Age and Gender on your application, death benefits will be paid based on what the correct payments would have been given the correct information.
-A Suicide Clause in a Life Insurance states that if you commit suicide in the first two years of inception of an Insurance policy, the death benefits will NOT be paid. Instead, your premiums will be returned.
-If your insurance lapses during the grace period usually 30 to 60 days period and death occurs, the Insurance will still pay death benefits but minus the premiums that would have been paid during that time.
-Life Insurance proceeds are usually NOT Taxable with few exceptions
-It is always a good idea NOT to own your Life Insurance policy. Owning it will include its death benefit into your Gross Estate hence incurring Estate Taxes on the benefits except it qualifies for Unlimited Marital deductions.
-First To Die-Provides Death benefits when the first insured dies
-Second To Die-Provides Death benefits when the second or last insured dies
-Your Cash Value Balance with your Insurance Company is protected should the Insurance Company go Bankrupt
A) Term Life
-Protection ceases when the term ends unless it is renewed
-The premium you pay may be Level or increasing on an annual or set period basis
-Generally, there is no cash, savings or investment options
-Its face amount may be Level or decreasing
-You can have the option of converting a term policy without proof of insurability
Who is Term Life Insurance Good For?
-A young person
-People with some amount of money and are willing to spare or budget towards Life Insurance
-People with temporal needs
B) Whole Life
-It provides permanent lifetime protection for as long as premiums are paid
-They have a Savings and Investments options. The Savings and Investments do earn interest too
-The cash value which may be used as loans usually has a minimum guaranteed rate of interest
Recommend Whole Life for?
-People who are willing to accept investment risk
-People who think they can earn a higher than normal return on investment
-People who have a permanent need
-People who are concerned about Estate Taxes
Types of Whole Life
-Ordinary Life-Pay premiums until the age of 100
-Limited Pay Life-Pay premiums to a certain age—Premiums are higher than Ordinary Life
-Variable Life-You are willing to accept Investment Risk
UNIVERSAL LIFE INSURANCE
-Insured may want to adjust Premiums, Face Value and Cash Value
-Insured does not direct the investment portion and may use the cash value to pay premiums
*Universal A—Death Benefit is EITHER Cash Value or Face Value
*Universal B—Death Benefit is BOTH Cash and Face Values
VARIABLE UNIVERSAL LIFE
-Has investment options but no minimum guaranteed rate of return or interest
-The Cash Value is invested in a separate account from the insurer’s general account
-While the cash value is not guaranteed, it is not counted as the asset of the insurance company should the company fail.
WHO SHOULD GET UNIVERSAL LIFE INSURANCE?
-Someone who wants flexibility as to how and when premiums are paid for example a seasonal or commissioned based salesperson
-Someone who does not want to bear the investment risk.
Disclaimer: This information may be general in nature and my advice is for you to consult your Financial Adviser, your Accountant or your Attorney for your specific situation. Also laws may vary from state to state.
