Life insurance is one of those necessities in life that most people don't like to think about, but it is one of the most important policies someone can own. In most cases, Life insurance is used to provide security and peace of mind to you and your family in the event of an untimely death. Life insurance can be used as income replacement for your spouse left behind, college savings for your children, final expenses or debt replacement. Many businesses that use life insurance to fund buy/sell agreements or also for collateralization when borrowing funds from banks or lending institutions. If you need help determining how much life insurance is sufficient for your needs contact one of our trusted advisors today.
Crosspointe Insurance works with more than 30 of the most well-known and respected life insurance carriers in the industry. Learning a little about a few of the various types of life insurance will help you determine what type of plan that you need to protect and secure the future of your family or business.
Here is a brief overview of five major types of life insurance:
Term Life Insurance is probably the most common and least expensive type of life insurance an individual can buy. Term life insurance is a very simple kind of life policy. Basically, you choose the amount of death benefit you want and choose the length of time that you need the coverage in force. For example, Term Life insurance plans can range anywhere from 10 - 30 years. In most cases, Term Life builds no cash value, but if death occurs during the term that the coverage is in force it pays a specified lump sum to whoever you designate as the beneficiary. In most cases, the premium costs on Term Life insurance do not change during the chosen term length.
While term life insurance has a defined policy term and death benefit amount, there are other types of life insurance that can build cash value in addition to the death benefit. Typically, the monthly cost of these plans can be quite a bit higher than term life insurance. Types of cash value policies include Whole Life, Variable Life, Universal Life and Universal Variable Life.
Whole Life Insurance pays a death benefit to the named beneficiary while offering a low-risk cash value account and ability to earn tax-deferred savings. The fixed premiums on Whole Life Insurance cannot increase during your lifetime unless you change the death benefit. However, because the insurance company manages the cash value of the account, the dividends of this can be applied to your premiums. You can also withdraw money from this account during your lifetime in most instances.
Variable Life Insurance provides a more permanent type of protection with more flexibility than Whole Life. Designed for the more risk-tolerant policyholder, the death benefit on a Variable Life policy can vary in relation to the returns on your cash value account. However, it does offer a low-risk, tax-free way to accumulate cash.
Universal Life Insurance is more flexible than Variable Life or Whole Life insurance, allowing for flexible premiums and face value amounts. In addition to paying a death benefit, it allows you to earn market interest rates on the cash value portion of the account. You can also borrow or withdraw from the plan during your life time. However, you cannot move money between accounts or split funds between money market, stocks and bonds.
Universal Variable Life Insurance gives you more control over the cash value account than other types of insurance. With this type of policy, you can invest in separate accounts for stocks, bond funds and money market. It also offers premium flexibility and the ability to withdraw from these funds during your lifetime. However, if you terminate the policy in its earlier years, you will receive a reduced cash amount than what you would receive in a whole contract. Since you personally manage the investments in the cash value account, its long-term success depends on the choices you make. The premiums on these accounts are larger because they must cover both the insurance and cash value contributions
Crosspointe can help you determine which of these five types of life insurance is right for you. Our experienced agents are standing by and ready to answer your questions and make recommendations.