Life Insurance Planning

Most people are familiar with insurance. They often have home, auto, or medical insurance to protect their health and property. Businesses often obtain general liability and worker’s compensation insurance to protect their employees and business assets.  However, many people overlook the value of life insurance.  Life insurance is an essential tool to protect your family and business and to provide peace of mind. There are several types of life insurance policies. This article will discuss the different types of life insurance available to individuals.

The most common type of life insurance is term life insurance.  It is also the simplest to understand.  A term life insurance policy provides coverage for a specified period of time; generally one year.  While the policy term is one year, the policy is renewable as long as annual premiums continue to be paid.  Premiums may increase on an annual basis or may be fixed for a longer term, such as 10, 20 or even 30 years.  A term life insurance policy may offer a level, decreasing or increasing death benefit, depending on the purpose for the insurance.  For example, a client, who desires term life insurance to pay off his mortgage in the event of his premature death, may look for a policy with a decreasing death benefit to match the remaining amount and the duration of the mortgage. Term insurance is generally the most inexpensive of all life insurance products.

In contrast to term life insurance, there is permanent life insurance. Unlike term insurance, permanent insurance is intended to last for the insured’s entire life.  A permanent life insurance policy has a cash value component called an accumulation account. The policy owner can use the cash value to pay future premiums when the client cannot afford to maintain the policy.  In addition, the policy owner can take loans from the cash value.  If the policy is cancelled, the cash value can be distributed to the policy owner.

There are several types of permanent life insurance policies.  The types of permanent life insurance policies include whole life, universal life, and variable life.  Whole life insurance requires the payment of a level annual premium that is calculated based on the years between the age at issue and age 100. A universal life insurance policy provides more flexibility than either term life insurance or whole life insurance as the insured can change the amount of premium to be paid in any given year, within certain guidelines.  In addition, the insured can adjust the face amount.  A universal life insurance policy generally provides a minimum guaranteed interest rate.  A variable life insurance policy offers the same flexibility as universal life.  However, the interest rate is not guaranteed.  The value of the policy’s accumulation account will depend upon the performance of the investments selected by the policy holder.  If the investments do not perform as expected, the insured may have to pay increased premiums.

For more information on which life insurance product may be suitable for you, contact RMC Group at 888.599.5553.