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Life Insurance Life insurance is the foundation of financial security for you and your family. It protects your financial resources against the uncertainties of life so you can plan for the future. It is an important part of a sound financial plan, life insurance provides a valuable death benefit to your beneficiaries upon your death. Your beneficiaries can use this money to replace some of the income you would have earned or to help pay off debts and other expenses.
If you were to die unexpectedly, could your family take care ot the mortgage? What would they do? It's important to protect your ability to pay for your home and ensure that your family will be able to afford living there should something happen to you. No one wants to think about untimely death, but as a homeowner, it's your obligation. A life insurance policy can be designed that could pay off your home and ensure your family can continue the lives you're built for them.
Cash Value Life Insurance
Cash value life insurance is a type of insurance where the premiums charged are higher at the beginning than they would be for the same amount of term insurance. The part of the premium that is not used for the cost of insurance is invested by the company and builds up cash value that may be used in a variety of ways. You may borrow against a policy's cash value by taking a policy loan. If you don't pay back the loan and interest on it, the amount you owe will be subtracted from the benefits when you die, or from the cash value if you stop paying premiums and take out the remaining cash value.You can also use your cash value to keep insurance protection for a limited time or to buy a reduced amount without having to pay more premiums. You also can use the cash value to increase your income in retirement or to help pay for needs such as a child's tuition without canceling the policy. However, to build up this cash value, you must pay higher premiums in the earlier years of the policy. Cash value life insurance may be one of several types; whole life, universal life and variable life are all types of cash value insurance.
Whole Life Insurance
Whole life insurance provides protection as well as a cash value. Your premiums remain at a fixed level for the duration of the contract. Over time, the policy builds up cash value on a tax-deferred basic. It may also provide for dividends (which are not guaranteed), that can be used to add more coverage, can build a cash-value that you use to supplement your retirement income or help for a child's education - it's your money to use as you need. Whole life insurance pay benefits directly to the person you choose. It helps to take care of your outstanding medical bills, unexpected expenses or debt that you may leave behind. It's how you want things done.
Whole life insurance covers you for as long as you live if your premiums are paid. You generally pay the same amount in premiums for as long as you live. When you first take out the policy, premiums can be several times higher than you would pay initially for the same amount of term insurance. But they are smaller than the premiums you would eventually pay if you were to keep renewing a term policy until your later years.
Some whole life policies let you pay premiums for a shorter period such as 20 years, or until age 65. Premiums for these policies are higher since the premium payments are made during a shorter period.
Universal Life Insurance
Universal life insurance is a kind of flexible policy that lets you vary your premium payments. You can also adjust the face amount of your coverage. Increases may require proof that you qualify for the new death benefit. The premiums you pay (less expense charges) go into a policy account that earns interest. Charges are deducted from the account. If your yearly premium payment plus the interest your account earns is less than the charges, your account value will become lower. If it keeps dropping, eventually your coverage will end. To prevent that, you may need to start making premium payments, or increase your premium payments, or lower your death benefits. Even if there is enough in your account to pay the premiums, continuing to pay premiums yourself means that you build up more cash value.
A universal life policy allows you to pay premiums in any amount and at any time, subject to certain minimums or maximums set forth in the contract. It also may allow you to increase death benefits (usually subject to evidence of good health). It can also meet the needs of people who desire long-term death benefit protection with a flexible premium structure.
Variable Life Insurance
Variable life insurance is a kind of insurance where the death benefits and cash values depend on the investment performance of one or more seperate accounts, which may be invested in mutual funds or other investments allowed under the policy. Be sure to get the prospectus from the company when buying this kind of policy and STUDY IT CAREFULLY. You will have higher death benefits and cash value if the underlying investments do well. Your benefits and cash value will be lower or may disappear if the investments you choose didn't do as well as you expected. You may pay an extra premium for a guaranteed death benefit.
Variable life insurance offers a choice of death benefit options and a potential to accumulate non-guaranteed tax-deferred cash value that fluctuates based on the performance of underlying investment options that you choose, and reflects a range of risk including stocks, bonds, and accounts that guarantee interest and principal.
The cash value of a variable policy is not guaranteed and the policyholder bears that risk. If the market does not perform well, your cash value and death benefit may decrease. Some policies guarantee that the death benefit does not fall below a minimum level.
Term Life Insurance
Term life insurance covers a defined period (1 to 35 years) and only pays benefits if you die during the defined time. Depending on the terms of the policy, premiums will remain constant or increase each year. Some policies can be renewed at the end of the term, but premiums rates will usually increase.
Term life insurance is designed to cover needs that will disappear in time, such as mortgage or tuition payments. Initially, premiums for term insurance are lower than for permanent insurance, which enables you to buy higher levels of coverage at a younger age. Term life insurance does not offer cash value buildup.
Life insurance provided through an employer is most commonly term insurance. When an employee leaves, coverage is terminated. Most states require a conversion privilege, which allow employees to convert their policy to a permanent policy when they leave their job.
Term life insurance can help meet a wide variety of business and personal needs and often provide the most coverage for your premium dollar for set periods of time. Whether you want to supplement your existing or simply purchase insurance to meet a specific need, term policies have the flexibility to help meet your needs.
Survivorship Life Insurance
Survivorship life insurance (second-to-die) insures two people and pays death benefit when both have died. It is used primarily for wealth preservation.
If you died tomorrow... How would your loved ones pay final expenses and other obligations when funeral expenses alone range from $5,000 to $15,000?
The Florida Highway Patrol said preliminary figures show at least 2,780 fatilities in 1995, 117 highway deaths in Duval County alone, 111 in 1994. Accident-related deaths in 1988 show at least 3,152.
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