If you support others through your efforts or income, you need to consider life insurance. There are many specific reasons to explore life insurance, especially if your household relies on a single source of income. Ask yourself:
- Who will take care of my final expenses?
- How will my income be replaced?
- How will my children attend college?
- How will lingering debts be settled?
- How will key expenses like house payments be covered?
Everything you have built and will continue to build over your lifetime is vulnerable without appropriate life insurance coverage.
Now that you know you need life insurance, where do you begin?
Although the main purpose of life insurance is to secure a death benefit for your beneficiaries, the world of life insurance has evolved greatly to include things like living benefits and cash value accumulation. Additionally, there are a whole host of features and sub-features with life insurance types that complicate meeting the simple need of obtaining an appropriate death benefit. While there are more options than ever with life insurance, navigating these options can be tricky, especially if you have yet to focus your objectives. This is why meeting with a Tremont Street Financial advisor is particularly helpful; we are able to help you prioritize your goals and develop a program that compliments your unique situation.
Types of Life Insurance
There are two main types of life insurance: term (temporary) and permanent. Within these categories are several classes and unique versions.
Term Life Insurance
A term life insurance policy is designed to last for a certain period, typically issued in ten-year increments. At the end of the coverage period, the policy is terminated, although you may have the option of renewing for another period of coverage if you outlive the term. Term life insurance policies do accumulate cash value and thus are often the cheapest life insurance.
Permanent Life Insurance
Permanent Life Insurance policies give coverage for a policyholder’s entire life. As long as the policy remains in force with premiums and applicable charges covered, a permanent life insurance policy will generate death benefits no matter when the policyholder dies.
These types of policies have cash value accumulation and benefits that can be used during policyholder’s life. There are a handful of permanent policy types:
Whole Life Insurance – this type of permanent life insurance accumulates a cash value a guaranteed rate of return.
Universal Life Insurance – Universal Life policies have flexible premium options and an adjustable death benefit, as well as a cash value accumulation component. Universal life insurance has many sub-categories including:
Fixed Indexed Universal Life (FIUL)
Like a fixed indexed annuity, a fixed indexed universal life insurance policy accumulates value based on a stock market index. This does not mean, however, that there is direct exposure to the market.
Guaranteed Universal Life Insurance (UL-G)
As long as premium targets are met, a guaranteed universal life insurance policy issues a death benefit, even if cash value is exhausted.
Current Assumption Universal Life (CAUL)
In this universal life insurance policy, premium payments that rise over the pure cost of the contract are allocated into an investment portfolio, often the carrier’s general investment account.
Keep in mind that the information above is simply a high-level overview of life insurance and policy types. The specific details and contract information will depend greatly on the carrier, contract type, and the consumer. Contact us now with your life insurance questions and we will help focus your objectives and find the right program for you.