Life Insurance Basics Life Insurance Explained
Life insurance is a key component in the best retirement plans. This flexible financial vehicle can help ensure that income still flows in for survivors and that debts are paid off, so that loved ones don’t have to suffer monetary hardships. This type of coverage will pay out a death benefit in return for premiums paid if the insured dies while the policy is in force. The proceeds are not typically taxable as income to the beneficiary.
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Types of Life Insurance Policies
There are two primary categories to consider when choosing to buy a life insurance policy. These are term and permanent. Term life insurance offers a death benefit with no cash or investment to build up in the policy. These policies remain in force for a specified period of time, such as five years, ten years, or even thirty years. When the coverage expires, the insured may have to re-qualify to keep the policy going. At that time, the premium will usually be higher because it is based on the insured’s then-current age and health condition. Because term life insurance is considered a basic, plain vanilla type of plan, this coverage cost usually starts out fairly low – particularly if the insured is young and in good health at the time of application. Permanent life insurance consists of death benefit protection and a cash value component. The funds that are in the cash value are allowed to grow on a tax-deferred basis. This means that there is no tax due on the gain unless or until the money is withdrawn. The premium for a permanent life insurance policy is oftentimes higher than that of a comparable term insurance plan, with all other factors being equal. However, the amount of a permanent life insurance policy’s premium will oftentimes stay the same throughout the entire lifetime of the policy. So, unlike term, there is no need to renew a permanent life insurance plan. There are several different types of permanent life insurance available in the marketplace today. These include:
- Whole life insurance
- Universal life insurance
- Variable life insurance
- Variable universal life insurance
Which Type of Life Insurance is Right for You?
Because there are so many different life insurance types, it is important to determine which might fit best with your specific needs. Working with an insurance specialist can be beneficial. That way, you can narrow down the right type of coverage and compare different policies and premiums. To speak with our advisors, please feel free to contact us via email by going to certifiedsafemoney.com. We look forward to assisting you with your life insurance coverage needs.
