Life insurance is one means of providing financial security for those who survive your passing away.
What is Life Insurance?
Generally, life insurance pays a certain amount of money to a designated person called a beneficiary, based on an agreement made with an insurance company. That agreement provides for periodic payments from, or on behalf of, the insured person. These payments are called premiums. In return, the insurance company will pay an agreed-upon amount, called a death benefit, to the beneficiary if the insured person passes away during the term of the policy.
Premium amounts vary according to the type of life insurance purchased, the age and physical health of the insured person (including smoking), the term of the insurance, and the amount of the death benefit selected.
Life InsuranceThe basics of life insurance policy types
There are several different types of life insurance, but these fall into two main forms - term insurance and permanent insurance.
Term life insurance provides a death benefit for a fixed number of years, usually 5, 10, 15 or 20 years. Premiums are a fixed amount over the life of the policy. When the term of coverage ends, the coverage ends as well. Term insurance tends to be the least costly form of life insurance and builds no cash value, but becomes more costly to renew the term as the insured person ages.
Permanent life insurance includes a few major types of insurance that provide coverage to the insured so long as the premiums continue to be paid. Most types of permanent insurance develop a cash value that can be accessed over the life of the policy. Permanent life insurance forms include the following:
- Whole life insurance - this permanent insurance type includes fixed life coverage in addition to a savings element that builds cash value on a tax-deferred basis. The cash value of the policy is built by the insurance investing a portion of your premium in company-chosen investments. Whole life premiums remain fixed over the life of policy (often to age 100), so long as they are paid timely and in full.
- Universal life insurance - provides a flexibility that is not inherent in most other forms of life insurance. A form of whole life insurance, this policy type has the ability to develop internal cash value. All policies provide a minimum guaranteed interest rate of return each year. The rate, however, fluctuates each year depending on the earnings of the company. When designed correctly the flexibility allows premium payment amounts to fluctuate in addition to the death benefit. Unlike term insurance that develops no internal cash buildup, a client may decide borrow from their cash value or simply “cash in” and receive a check for the surrender value of the policy at that time. Policies can be to designed so that premiums can be paid over a set number of years then cease or to be paid for the life of the insured. As there is a fluctuating interest rate, policies need to be reviewed periodically to make sure that they are still meeting the client’s needs.
There are other products sold as “life insurance” that are actually regulated under federal securities laws. As such, Bryant Asset Protection is not permitted to advise you on these, but the professionals at Bryant Asset Management may be able to help.
Always, always, always get help from a professional!
In virtually all cases, Bryant Asset Protection strongly recommends that anyone considering life insurance be guided by a professional in making these important choices.
Accordingly, we would discourage clients from purchasing life insurance via the internet without assistance from Bryant Asset. Internet life insurance sources can be eager to sell you a policy and may be less concerned with your actual needs than a licensed, experienced agent who takes the time to fully assess your circumstances and advise you accordingly.
A request for assistance from Bryant Asset Protection in considering life insurance can be found below.