LIFE INSURANCE COVERAGE'S
There are several types of Life Insurance. What is the right Insurance for you and your family. See below for the most common one's in the industry.
Would your family have the financial assets to continue their current lifestyle? Would they be able to keep their home? Would there be money for college? and what about the funeral expenses and estate taxes at the time of your death? What would happen if you outlive your retirement? What will tomorrow's economy affect the value of your assets?
The main reason to buy life insurance is for the death benefits protection it provides. This death benefit can address immediate needs when insured dies, including - Income replacement for primary wage earners - Supplement college funding - Mortgage and other debts - Estate tax coverage - Final expenses - Business succession
Types of Life Insurances
Term Life Insurance provides coverage for a specific period of time, after which the coverage stops and the policy terminates. Though they offer the advantage of level, predictable premium payments, term policies provide death benefit only - they have no chase value accumulation potential.
Whole Life (Permanent)
Whole Life Insurance also offers the predictability of level premium payments and can provide coverage for your entire life (instead of a set term). Unlike term policies, whole life policies have cash value you can access through policy loans and withdrawals
Universal Life Insurance can provide for your entire lifetime. It offers you the flexibility to pay your premiums at any time and in any amount (subjects to limits), as long as the policy expenses and cost of coverage are met. Universal life policies also have cash value that can accumulate at a fixed interest rate, which you're able to access through policy loans and withdrawals.
Index Universal Life Insurance
You pay your premium, with the flexibility to chose between the minimum and maximum premium amount. The minimum premium is determined by the insurance company and is the minimum amount required to keep the policy in force.
The maximum premium is the most the Internal Revenue Services (IRS) will allow you to pay into the policy. This premium, minus policy fees and charges, has the potential to build cash value in the policy, which can be accessed through policy loans and withdrawals. The Premium also goes toward providing an income-tax-free death benefit for your beneficiaries.
All life insurance policies carrier fees and charges. These policy fees and charges are deducted from your premium and offsets various expenses the insurance company insure in connection with your life insurance policy, including paying the death benefit, underwriting expenses, and issuing and administering the policy.
Protection from Negative Index Performance
With an FIUL policy, your available cash value can earn interest based on charges in an external market index. The insurance company call this "indexed interest.
When you purchase your policy, your premiums (minus fees and charges) is allocated to the index allocation option(s) you choose. The insurance company tracks the performance of your index(es) for you and then your chosen crediting method yo calculate the index interest. This indexed interest is added to your cash value.
You get cash value accumulation potential when the going is good. t the end of each policy year, if the result is positive, you'll be credited indexed interest to your policy (subject to caps or participating rates)
Any index interest your receive is locked in each year - and once its locked in, it can never be lost, even if the index drops below this amount. Keep in mind that fees and charges will reduce the cash value.
You get a level if protection when the going gets though, If the result is negative, you'll receive no indexed interest - but your policy's cash value won't decrease due to negative index performance, because the value is locked in from the previous year, although fees and charges will reduce the cash value. The insurance company can do this because you're not actually participating in the market or investing in any stock or bond.
With FIUL, you're not restricted based on your income on how much premium you can pay each year. There are no IRS rules like the ones that prevent persons in upper tax brackets from participating in certain tax- qualified plans.
Instead, to receive an income-tax-free death benefit and to ensure any available cash value accumulates on a favorable tax-deferred basis, the Internal Revenue Code (IRC section 7702A) regulates the relationship between the death benefits and the cash value accumulation. This can set limits on the timing and amount of premium you can pay. Premiums paid may also be limited to avoid adverse tax consequences.
But generally speaking, you have the flexibility to increase what you pay in premiums, enabling you the opportunity to build up your cash value faster.
Today, the need is greater than ever to protect your estate while building your retirement assets and sheltering them from excessive taxation. FIUL insurance offers three kinds of tax advantages:
Income-tax-free death benefit
Tax-deferred cash value accumulation potential
Income-tax-free policy loans and withdrawals
And of course, the less you pay in taxes, the more cash value that remains in your policy-adding to your potential to accumulate more for retirement and other financial needs.
Optional Rider benefits (depending on insurance companies)
Inflation Protection Rider: Once exercised, this rider may provide an annual credit to the policy based on positive in the CPI-U index. The CPI_U is the Consumer Price Index for Urban Areas, U.S> City Average (unadjusted), published by the Bureau of Labor Statistic of the U.S. Department of Labor
Waiver of Specified Premiums: This rider offers the reassurance of knowing a specified premiums will be waived if the insured becomes totally disabled: amount to be waived is selected by owner at issue. The minimum is usually $25 per month and the maximum is $150k depending on the insurance company or two time the minimum annual premium, whichever is less.
Life Income Benefit Rider: This provides a benefit of the life of the insured in exchange for a charge from the accumulated value and provided that certain conditions are met. Conditions include but are not limited to the following: the insured must be at least age 60 but no greater than age 85; and the policy must have been in force for at least 10 years or at least 10 years have passed since the last face amount increase
Addition Term Rider: You may add extra term insurance for up to six times the face amount of your policy. This rider may be a food fit if you need a large amount of life insurance (for a finite period of time) but want to keep the cost down.
terminal Illness Rider: Allows for payment of a portion of an insured's death benefit, on a discounted basis, if the insured has an illness or chronic condition which can reasonably be expected to result in death in 24 months or less. In most cases there is no fee for this rider.
Critical Illness Rider: Allows for the payments of an insured's death benefit, on a discount basis, if the insured is Critically Ill. Covered critical illnesses are heart attack (myocardial Infarction), stroke, diagnosis of cancer, diagnosis of end-stage renal failure, major organ transplant, diagnosis of ALS, or blindness. In most cases this is a free rider.
Long-Term Care Rider: In the event that the insured's bad health compels him or her to stay at a nursing home or receive home care, this rider offers monthly payments. Although long-term care insurance can be bought individually, insurance companies also offer riders that take care of your long term care costs.
Other Insured Rider: This rider provides low-cost term insurance for other family members or business partners. You may add term insurance for up to four other people, for a total of up to four times your death benefit, while continuing to build your policy's cash value. Coverage can stay in effect to age 100 for each additional insured.
Death benefit Protection Rider: Provides that the policy will not lapse in the 15 policy years even if the net surrender value is less than or equal to zero provided the premiums paid reduced by withdrawals, both accumulated with interest, less the policy loan balance, equals or exceeds the accumulation with interest of monthly guarantee premiums.
Return of Premium Rider: The main aim of this rider is to give back most of the premium that you put into your policy. Under this rider, you have to pay a marginally premium and at the end of the term, your premiums are returned back in full. In the event of death, your beneficiaries will receive the paid premium amount.
Long-term care: Long-term care insurance can be pricey, so some people find a long-term care rider easier on the budget. The rider allows you to use your death benefit to pay for long-term care expenses you may incur. Some riders allow the long-term care benefit to exceed your policy's death benefit by two to three times, or extend the number of months over which you can receive long-term care benefit payments such that the total payments available are greater than the death benefit. Know however, that long-term care payments will reduce the death benefit on a dollar-for-dollar basis.