Life

Term    Universal   First to Die    Second to Die   Whole Life    Life with LTC

  

 What is Term Insurance?

Term insurance is like leasing a car. You purchase death benefits for a specified period -- usually 10, 20  or 30 years. When the period is over, it's like turning in the leased car. The deal is done and you walk away. Term insurance pays a specific lump sum to your designated beneficiary if you should die during the term of the policy. The policy protects your family by providing money they can invest to replace your salary, and to cover immediate expenses incurred by your death. Term life insurance works well for young, growing families, when financial needs are especially low. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else. 

What is Universal Life (UL)?

Universal life insurance is insurance that offers more flexibility than many other forms of insurance, because you have more control over the cost of your premiums as well as the ability to invest and earn interest on the cash value that the policy builds. The advantages of universal life include:

• Flexibility - You can choose your coverage amount and change the amount of coverage throughout the life of the policy without having to develop a new policy.
• Cash building - You can pay extra into the policy on top of your regular premium or invest lump sums to increase the cash value of the policy.  When you have a tight month, the extra cash value can be used to cover the cost of your regular premium so you don't lose the policy.
• Customizable -You can customize the coverage to accommodate your needs, protect your business and family, and anticipate your future goals.

The biggest advantage of a universal life policy is that it offers you a way to build tax deferred assets, and the value you build may never be taxed if it remains in the policy and is paid out as a death benefit.

 

 
First-to-Die-Life

The policy involves two individuals and whoever is the first to die, the survivor gets the death benefit. First to die life insurance policies are more common among business owners and married couples.

 

Business owners take out a first-to-die life policy to ensure that -- should one of the business owners die -- the surviving business owner has the life insurance proceeds available to continue the business.

 

Married couples also find the first-to-die life insurance policy to be a great option. Couples who are married are pretty much like business partners. They take out loans together and build expenses and financial obligations together. So if one or the other dies, then the surviving spouse may be left with a bevy of financial burdens. The first-to-die policy will help to secure both parties in the event of a death, no matter which spouse happens to pass away first.

 

This policy is typically less expensive than buying two separate universal or whole life policies. 

 

 

Survivorship or 2nd-to-die life insurance

A survivorship life insurance policy, also called 2nd-to-die life insurance, is a type of coverage that is generally offered either as universal life or whole life insurance and pays a death benefit at the second death of two insured individuals, usually a husband and wife.

 

It has become extremely popular with wealthy individuals since the mid-1980's as a method of discounting their inevitable future estate tax liabilities which can, in effect, confiscate an amount to over half of a family's entire net worth! Congress instituted an unlimited marital deduction in 1981. As a result, most individuals arrange their affairs in a manner such that they delay the payment of any estate taxes until the second insured's death.

 

A "2nd-to-die" life insurance policy allows the insurance company to delay the payment of the death benefit until the second insured's death, thereby creating the necessary dollars to pay the taxes exactly when they are needed! This coverage is widely used because it is generally much less expensive than individual permanent life insurance coverage on either spouse.

 

What is Whole Life Insurance?

Whole life insurance is a type of permanent life insurance, and is designed to remain in effect throughout one's lifetime. It is well suited to needs that do not diminish over time, such as paying estate settlement costs and taxes.

 

Generally, the life insurance rate (or premium) for this type of policy remains the same throughout the life of the insured. During the early years of the life insurance policy, premiums are much higher than those of a term life insurance policy. As a result, and by design, these life insurance policies develop cash values which can be accessed by the owner of the policy through surrenders or policy loans. Cash values in whole life insurance policies typically include two components.

 

Life with LTC

Life with LTC combines the best features of life insurance and long-term care into one design; it is typically sold as a universal life contract that requires a single premium and that funds an accelerated death benefit rider to pay out long-term care benefits if needed.

A single premium payment into this universal life product combines three features in one product:

Once the premium is inside the universal life insurance policy, the account value earns an interest rate (typically at least 4%) on a tax-deferred basis, building up a cash reserve that can be used tax free to cover nursing or home-care costs. Any money that is not spent on nursing care benefits will be distributed to your heirs as an income tax-free death benefit under Internal Revenue Code Section 101(a)(1).