To plan for the future means to make certain commitments today. Life insurance is a crucial element of family planning because it ensures the financial security of the beneficiaries after the policyholder's death.
A life insurance policy provides you and your family with peace of mind. After all, it's nice to know that your loved ones are protected and can benefit from the fruits of your labor so they can invest in their own future.
Life insurance is leverage. It is a financial hedge designed to protect your loved ones from the risk of your dying too soon. Preliminary pricing is based on several factors:
Remember, life insurance companies are for-profit entities and they price policies based on the anticipated risk they expect to incur for an individual.
The younger and healthier you are when you purchase your policy, the less expensive it will be.
- Term Life
- Universal Life
- Whole Life
What's best for you depends on why you need it and what you want it to do for you. Is your need temporary, permanent, or both? Do you want it to provide financial security to your loved ones only in case of your premature death or do you want it to provide living benefits in the form of interest free loans, and tax free income as well as a death benefit to your heirs?
Term life insurance is the least expensive because it is temporary insurance with no cash value. Issued in terms of length from 1 to 30 years, it has level premiums for the duration of the term, then it expires or becomes annually renewable at exponentially higher premiums.
Universal life is considered permanent life insurance and can build cash value if purchased at the right time and funded adequately, or can be funded strategically to pay a death benefit for your lifetime. Most universal policies have flexible premiums and allow a range of payments to be made into them without lapsing or turning them into modified endowment contracts (losing the IRS tax free status for everything except the death benefit). Universal life policies have interest crediting features that range from fixed, indexed, to variable.
Whole life insurance is designed to last your whole life with level payments throughout your lifetime. Most policies pay interest and some pay dividends as well. Whole life policies build cash value over time and some can be converted to reduced paid-up policies.
Because of the array of products now available from which to choose, and the different features and riders available, unless you want a simple, straightforward term life policy, your best bet is to consult with a life insurance agent. Your agent will work with you to help you determine your needs and find the products that best fit your specific needs.
Remember the question about the price of life insurance? It's based on several factors, and the first one is...age. The longer you wait, the more expensive it is.
In addition to age, your health is a major consideration. Although you may not be declined by all insurance carriers, if you have too many health issues you will certainly be rated for additional risk. In the worst case, you will become uninsurable or life insurance will become unaffordable.
If cost is an issue, start with an inexpensive term policy that guarantees your right to convert to a permanent policy in the future. The best time to prepare for your future is now.
We consult on the following life insurance policies:
For more information, please contact our life insurance specialist: