Life insurance is a contract between an insurance policyholder and an insurance company, called an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person.
What are the reasons to buy life insurance?
Life insurance can be used in different ways to meet specific financial needs. Here are some common uses:
The specific use of life insurance will depend on an individual's unique circumstances, goals, and priorities. We work with you to determine the most suitable options for your specific needs.
Term life insurance is the most affordable type of life insurance available. It provides a fixed death benefit for a set number of years (also known as the policy's "term"). If you pass away during this period, your beneficiary will receive the full death benefit from your insurance policy.
One of the key features of term life insurance is its affordability. Compared to whole life insurance, term life insurance typically has lower premiums, making it a popular choice for individuals or families on a budget. The premium payments remain level for the duration of the term, providing predictable costs over that time period.
Term life insurance is often used to provide protection during periods of high financial responsibility, such as when there are dependent children, a mortgage, or outstanding debts. The death benefit can be used to replace lost income, cover daily living expenses, pay off debts, or fund future financial goals.
Whole Life Insurance
Whole life insurance is a type of permanent life insurance that provides lifelong protection for the policyholder. Unlike term life insurance, which covers a specific period of time, whole life insurance is designed to last for the policyholder's entire lifetime, as long as the premiums are paid.
The premiums for whole life insurance are typically higher than those for term life insurance, but they remain level and do not increase over time. A portion of the premium goes towards the cost of insurance, while the rest is invested by the insurance company. Over time, the investment portion of the premium accumulates tax-deferred cash value that the policyholder can borrow against or withdraw.
Benefits. The death benefit of a whole life insurance policy is typically a fixed amount, and it is paid out to the policyholder's beneficiaries upon their death. The death benefit can be used to pay for final expenses, such as funeral costs, as well as to provide financial support for loved ones.
Estate Planning. Whole life insurance is often used as a tool for estate planning, as it can provide a tax-free source of income for beneficiaries. It can also be used to fund a trust, which can be used to provide financial support for future generations.
Overall, whole life insurance offers lifelong protection and a guaranteed death benefit, as well as the potential for tax-deferred cash value accumulation and access to cash through loans or withdrawals. However, it is important to carefully consider the cost and benefits of this type of insurance before purchasing a policy.
Universal life insurance is a flexible type of permanent life insurance that offers both a death benefit and a cash value component. It provides lifelong coverage and has the added benefit of allowing policyholders to adjust their premiums and death benefits over time to meet their changing needs.
Unlike whole life insurance, universal life insurance allows policyholders to allocate their premium payments between the cost of insurance and the cash value component. The cash value grows over time on a tax-deferred basis, based on interest rates set by the insurance company. Policyholders can also make additional contributions to the cash value, subject to certain limitations.
One of the key advantages of universal life insurance is its flexibility. Policyholders have the ability to increase or decrease their death benefit as their circumstances change. They can also adjust the premium payments within certain limits, making it a suitable option for individuals with fluctuating income or changing financial goals.
Universal life insurance is commonly used for estate planning, business continuation, and legacy planning. It can help individuals protect their assets, leave a financial legacy for their loved ones, or provide liquidity for estate taxes. It provides individuals with the opportunity to customize their policy to meet their changing needs and goals over time. However, it is important to carefully review and understand the policy details, including fees, charges, and potential risks associated with the investment component.
