Considerations When Buying Life Insurance

There are several types of life insurance and things to consider when considering a plan.

Discussing the importance of life insurance can be a difficult topic – after all, few people like to talk about death. However, if others depend on your help, or if you have a large amount of wealth that you want to pass on to future generations, life insurance can be an important financial tool. There are many types of insurance and things to consider when purchasing a plan.

Types of Life Insurance

Term insurance is probably the most popular and cheapest form of life insurance – if you are under the age of 50. These policies are written for a certain period of time – one year, 10 years, 30 years, etc. – and usually have the option of renewal, at a time when premiums are expected to increase. If you want to lock the money for less than 30 years, choose a long term policy.

Low-cost insurance can be used to compare and repay the principal of the home, with benefits paid only if you die during the policy. Although the premium remains constant, the value decreases. Once you pay off your loan, the policy ends without cost, unless you choose to renew. You can opt for a variation of this policy which can also be renewed up to the age of 70 and converted into a permanent insurance policy without any medical examination.

Lifetime security is guaranteed with a savings account. You can lock in a premium, and a portion of that money earns you more money as long as you keep paying. As savings accumulate, you can borrow up to 90% of the face value tax-free (although borrowing reduces the death benefit and cash value).

Universal life is similar to whole life and includes more income on savings. You can also change the amount of your payments and withdrawals, and even change the nature of the policy. This can also provide a guaranteed return on investment.

Variable Life policies usually have fixed premiums and variable value policies. Instead, you can invest the money in a choice of stocks, bonds, or money market funds.1 However, note that the value of the money and the death benefit can also fluctuate, depending on your choice. ). There is usually a provision for death benefits but there is no guarantee on the cash costs. Additionally, premiums for these policies tend to be higher than universal life. Finally, if you earn money for the investment, it is tax-deferred as long as the money is still in the insurance contract.

The universal lifestyle is considered an “aggressive” principle. Although it is similar to variable life where you can choose from several investment options, there is no guarantee beyond the original death benefit. As such, it is more common with wealthy buyers who can afford the risks.

Survivorship life insurance

This is a special type of life insurance that guarantees two people, paying the death benefit only after the death of the second insured, thus avoiding two separate policies. They are used in estate planning, with death benefits that can pay estate taxes and pass wealth to future generations or beneficiaries. This policy may be preferred if one of the insured is finding it difficult to write a traditional insurance policy, perhaps for medical reasons.

First term life insurance

This type of policy insures the lives of two people and provides benefits on the death of the first insured. This is useful for paying off a mortgage or other large debt where there are multiple borrowers. It is often used to finance the purchase of products within a business that is closely related.

How many purchases

There is no perfect life insurance policy that you can buy. Others use the income-based method, choosing 5 to 10 of your annual salaries to calculate your net income. Others use money based on their needs and preferences.

To determine what you need to change, consider how much of your income is supporting your lifestyle and paying taxes. Determine your after-tax income, then add up your expenses, including housing, medical care, food, and more. This number represents the amount that your insurance will require. Many choose a death benefit that, once invested, provides an annual amount to cover the sum. In addition, the money needed to cover one-time expenses, such as college tuition or mortgage payments.

When calculating replacement costs for non-working spouses, support must provide for day care, home maintenance, and other types of care. Add that amount to any income from part-time work.

Finally, compare estate taxes, uninsured expenses, and funeral costs by calculating all of your needs instead of your income.

The end

Life insurance is an important part of financial planning. Looking at the different options and asking the right questions can help you choose the plan that provides the best coverage for you and your family.

The cost and availability of Life Insurance depends on many factors such as age, health and the amount of insurance purchased. In addition to premiums, there are contractual restrictions, fees, deductibles, benefit reductions, and policy-related fees. And if the policy is issued prematurely, there may be additional charges and income tax consequences.

Universal Life Insurance / Variable Life Insurance policies have fees and charges. Policy values ​​are variable and subject to market risk and loss of principal.

Any life insurance policy is based on the capabilities of the issuing company.

1 Investing in stocks involves risk, including the loss of principal. Bonds are subject to market and interest rate risk if sold before maturity. Bond prices will decrease as interest rates rise and are subject to availability and price changes. Investing in a money market fund is not insured or guaranteed by Federal Deposit Insurance Corporation or any other government agency. Although the fund wants to preserve the value of your money $1.00 For each unit, it is possible to lose money by investing in the fund. Guarantees depend on what the issuing company is offering.

This article is for informational purposes only and is not intended to provide specific advice or recommendations to any individual. There is no guarantee that the ideas or strategies discussed are suitable for all investors or will provide good results. Investing involves risks that may include the loss of principal. Jason BensonLPL Financial Advisor

918-256-4213 [email protected] 124 Scrapper StVinita