Life Insurance Anderson can be a powerful tool to help ensure your family’s financial security after you’re gone. But finding the right life insurance is about more than your budget.
It’s also about assessing your needs in the context of other financial vehicles you have in place, like retirement savings.
A term life insurance policy covers you for a certain period, usually 10, 20, or 30 years. If you die during that period, the death benefit (typically tax-free) is paid to your beneficiaries. Term life policies are inexpensive, making them an attractive option for people who want to cover their families’ debts or funeral costs.
When selecting a company for your term life coverage, look for a financially stable insurer with an AM Best financial strength rating and J.D. Power life insurance customer satisfaction ratings. Also, choose a provider that underwrites its policies rather than acting as a broker and selling another insurer’s policies. This will ensure you have better access to information about your policy, and can easily change or cancel the policy if your situation changes.
Many employers offer group term life insurance that provides a minimum of one or two times your salary, and usually doesn’t require health questions or a medical exam. However, this type of policy typically only lasts for a limited amount of time and doesn’t offer the same protection as an individual term life insurance policy.
In addition, term life insurance is less expensive than permanent policies because it does not include a savings element or accumulates cash value over time. This allows you to get more coverage for the same price you would pay for a permanent life insurance policy at the start.
Term life insurance can also be converted to permanent coverage without having to undergo a medical exam or answer any health-related questions, but this will typically increase the premiums. Permanent life insurance has a savings component that builds over the course of the policy, which you can withdraw or invest. This allows you to grow your wealth, and some permanent life insurance policies can even earn interest on their own. However, most whole life insurance policies are guaranteed not to go up in price, so you can count on a set amount of coverage for your entire lifetime. This makes them more costly at the outset than term life insurance, but in the long run may be worth it for some.
Whole Life Insurance
Whole life insurance, also known as permanent life insurance, provides coverage for your entire lifetime. It offers a death benefit that never decreases and a cash value account that may grow tax-free. Whole life insurance is typically more expensive than term life, but it also offers a permanent safety net that is more flexible than other types of life insurance.
The cash value portion of a whole life policy works similarly to a savings account. A portion of each premium goes toward building this account, which is usually guaranteed to grow at a fixed rate over time. You can borrow against your policy’s cash value, but you should be aware that the amount borrowed will be subject to income taxes if you do not repay it.
Whether or not whole life insurance is right for you will depend on your specific financial goals and long-term planning needs. If you are seeking a safe and steady investment opportunity with a saving component that aligns with your financial goals, whole life insurance is an excellent choice.
A whole life insurance policy can be designed for either individual or family protection. For instance, a family policy may provide coverage for both the husband and wife under one contract with the same premium. Additionally, a modified whole life insurance plan is available for individuals who want the security of a whole life policy but cannot afford to pay the full premium.
With the help of a knowledgeable life insurance professional, you can find a life insurance policy that meets your needs. Before you buy, make sure the company you choose is rated highly by independent sources for financial strength and reliability, such as A.M. Best, Moody’s, and Standard & Poor’s. It is also important to consider how much coverage you need and what type of policy you prefer. Ultimately, you want to be confident that your policy will meet your long-term goals, whether you are protecting your loved ones or creating an estate for future generations. Talk with an Aflac agent about your life insurance options and get a quote today.
Universal Life Insurance
Like whole life insurance, universal life offers permanent coverage with a death benefit and cash savings component. The difference is that UL premiums are flexible, which can allow you to pay more during times of prosperity and less during lean years. However, making significant changes to your premium payments could leave you with insufficient funds to cover the death benefit and cause the policy to lapse. To avoid this risk, consider consulting a fee-based life insurance advisor before making significant changes to your premium payments.
A major advantage of a universal life policy is that the death benefit is typically tax-free to your beneficiaries and growth within the policy is tax-deferred. Both factors can help make universal life policies more affordable than whole life. You also have the option to add riders to your universal life policy for additional benefits. For example, you can add an accelerated death benefit rider that allows you to access some or all of your death benefit while still living if you are diagnosed with a terminal illness.
You can also choose a variable universal life (VUL) policy, which lets you invest a portion of the policy’s cash value in market-based sub-accounts that earn different rates of return. VUL policies tend to be more complex than traditional universal life policies and may require active management. However, the potential for higher returns may offset the additional fees associated with this type of policy.
Ultimately, both whole life and universal life provide a level of flexibility that other types of permanent coverage lack. For many people, this type of protection can be a good fit. However, before you buy, consider carefully the non-guaranteed parts of a policy illustration and whether or not these are important to you.
When you’re ready to purchase a permanent life insurance policy, consult a fee-based life insurance advisor to understand your options and help you find the policy that best meets your needs. Whether you need life insurance for your family or yourself, you can count on us to offer competitive rates and superior service.
Variable Life Insurance
A type of permanent life insurance with an investment component, variable universal life (VUL) policies allow you to invest your policy’s cash values in a variety of investment options. This can provide greater flexibility with premium payments and death benefits than other life insurance options, but your cash value and investment returns may fluctuate.
VUL policies typically require a higher initial premium than whole and universal life policies, because the initial investment can be used to build up the policy’s cash value. However, since these policies last for life and do not expire, the higher cost may be worth it for those who are seeking lifelong protection and a potential return on their investments.
Like whole life and universal life, variable life provides a death benefit that is guaranteed to be paid at some point. It also offers a flexible premium payment option and the opportunity to grow your money through the policy’s investment account.
When selecting a VUL, Flagg recommends examining its internal policy costs, which are the annual fees the insurer charges for services such as administration and fund management. He also advises looking at the company’s history of paying out claims and its complaints ratio. Look for a policy with low internal policy fees and an insurer that pays out more than its competitors.
Another important feature of a variable life policy is its ability to offer tax advantages. Your life insurance provider should be able to explain the rules regarding the taxation of your policy’s investment accounts and any loans you take out from the cash value of your policy.
The other key difference between a VUL and a traditional life insurance policy is that a VUL’s investment account earns interest at a rate set by the policyholder, not a fixed amount like a whole or universal life insurance policy. This means that your investment returns could be much higher if you choose to invest in equity-based options, but it also means your cash value may drop due to market volatility.
The ability to borrow against your cash value is another benefit of a variable life policy, but it can also reduce the death benefit and increase the risk that the policy will lapse. In addition, it’s important to keep in mind that taking out a loan or withdrawal from your cash value can have negative tax consequences.