2: Whole Life Insurance
Permanent Life Insurance Protection
Whole life insurance is a permanent insurance contract, which provides lifetime coverage that will not lapse as long as a premium is paid each year. Whole life policies also build what is called cash value that can be accessed by the policy owner through out the life of the policy.
Policies Earn Dividends
Participating whole life policies earn dividends, which the policy owner can choose to receive or reinvest back into the policy. Policy dividends are not guaranteed and are tied to the overall financial returns of the insurance company.
These dividends if put back into the policy can enhance the cash value growth and increase the death benefit, by purchasing additional amounts coverage called paid up insurance. Dividends can also be used to help pay or reduce the premium. However, this option may have a negative effect on the life insurance policy’s cash value and death benefit.
Lifetime Guarantees
Whole life insurance is designed to provide life insurance protection for the life of the insured. Coverage is guaranteed not to expire or lapse as long as premiums are paid (whether out or pocket or by policy dividends). For this reason, premiums are much higher than that of a term or universal life contracts. A portion of the cash value is also guaranteed. This is a valuable feature since it enables the policy owner to recuperate at minimum the total premiums paid, with the potential for substantial growth over time.
Tax Advantages with Whole Life Insurance
Policy cash value growth is tax deferred and can be accessed tax free at any time via policy loans. Typically these loans do not have to be paid back and will be deducted from the death benefit if there is a claim. The tax deferred accumulation is an invaluable tool for the policyowner, since the policy can serve as a tax favorable savings account. Policyowners can also withdraw policy cash value or dividends up to total premiums paid without incurring any tax liability. Another tax advantage is the fact that generally beneficiaries receive the death benefit income tax free.
The death benefit paid to beneficiaries is received tax free since it is not considered income by the IRS. Policy dividends are not taxable to the policy owner since they are considered to be a return of premium.
3: Universal Life Insurance
Flexible premiums, cash value growth, and lifetime protection
Universal life is a flexible permanent life insurance contract that is similar to traditional whole life in that it builds cash value and provides coverage for the life of the insured. However, unlike a whole policy, universal life insurance offers policy owners the ability to adjust the premium amount and the timing of the payments.
Cash value growth is based upon a credited interest rate determined by the insurance company. There is a minimum interest rate that is guaranteed by the insurer and a non-guaranteed rate that may vary. There are some universal life contracts that can be tied to an index such as the S&P 500.
Flexible Premiums
Universal life insurance policies do not require annual premium to be paid each year. The policy will remain inforce as long as there is enough cash value to cover the cost of insurance. Allowing policy owners to determine the amount paid each year or even skip payments without losing their coverage. Universal life insurance is a great option for individuals seeking a long-term alternative to term insurance without the higher annual costs of a traditional whole policy.
Universal Life Policies Earn Cash Value
While the primary benefit of a life insurance policy is paid upon the death of the insured, permanent life insurance has an additional benefit which is available to the policy owner during life, called cash value. Cash value is earned within the policy and grows tax deferred, it is made up of the portion of the premium left over once administrative and insurance costs are paid.
The favorable tax treatment of the cash value makes it a valuable asset to policy owners looking towards retirement. Policy loans and withdrawals are available to the policy owner and may be used to meet a range of individual and business needs
Adjustable Death Benefits. And Stock Mark Returns
Index Universal Life Potential for Growth
A type of universal life which offers great potential for cash value growth are index universal life policies. Index ULs tie policy performance to stock market indices such as the S&P 500, Hang Seng, and Euro Stoxx. These policies allow the policy owner to benefit from the upside potential of the stock markets without any of the negative returns. It is an excellent option for individuals looking to combine low cost lifetime coverage with high cash value accumulation.
Index ULs Cap Rate vs. Participation Rate
Index universal life provides an opportunity for higher cash value growth through index accounts, set by the insurance company. Each index account has a maximum cap rate or participation rate which determines how much of the underlying index’s performance is earned by the policy. While the policy values are limited by the cap or participation rates; index UL’s also provide protection from volatility in the market by guaranteeing a minimum interest rate regardless of negative index performance. This ensures that any growth built in the policy is not wiped out by one bad year.
Index universal life insurance are premium flexible, which means an annual premium is not required to maintain the policy in-force. As long as there is enough cash value to cover the policy, administrative, and insurance costs it will not lapse. Combine this flexibility with the cash value growth potential of an index UL policy, the coverage can remain inforce for several years without additional premium.
Index universal life are more complex than standard UL policies, it is important to understand how each policy component can affect policy values and coverage.
Easy Approval Process. No Medical Exams Required.
5: Final Expense Insurance
Burial and funeral costs can become very expensive and put a financial burden on your family. A final expense insurance policy relieves your loved ones from the responsibility of having to pay for these costs out of pocket during their time mourning.
Final expense life insurance does not require a medical exam and the majority of these policies are guaranteed issue, which means you cannot be turned down due to pre-existing medical conditions.
Final expense life insurance is a viable solution for individuals, who have been previously denied coverage due to medical reasons.
Who Can Qualify?
- Individuals ages 50-85.
What Does Final Expense Life Insurance Cover?
Final expense life insurance does not only pay for funeral and other related expenses. It can also cover other financial obligations that if not taken care of can become the responsibility of your heirs.
- Funeral home and services
- Transfer of remains
- Embalming and Preparations
- Burial Casket
- Cemetery/Burial plot
- End of Life Healthcare Expenses
- Legal and Tax Costs
- Unpaid Debt (credit cards, personal loans etc.)
Advantages of Final Expense Life Insurance
- Quick and Easy Approval
- Guaranteed Issue Policies
- No Waiting Periods
- Premiums Do Not Increase Due to Age
- No medical exams needed to qualify
- Coverage cannot be cancelled as long as you pay the premium
