The Luxuries of Life
Do you have a minute to learn about the luxury of life insurance? We hope you do.
The beautiful luxury of life insurance is that it's pretty straight forward.
If you have a policy in force, the carrier will pay a death benefit to your beneficiaries when you die.
Although the premise is simple, life insurance can take many forms, and it can be difficult to understand how each product works.
Below, we have laid out the different life insurance products available through Padalelux Insurance:
Let's start with Term Life Insurance.
Term life insurance is the most popular and least expensive type of life insurance.
It provides coverage for a set duration of time, called the “Level Term Period”. These term lengths typically range from 10 – 40 years.
If you die during the term period, the insurance carrier will pay out the death benefit to your beneficiary. Additionally, the premiums will not increase during the level term period.
But what happens after the level term period ends?
In some term products, the policy will simply lapse, and you will no longer have coverage. In other term products, your policy will become an Annual Renewable Term (ART), which means that your premiums will rise every year and will quickly become unaffordable.
Did you know that most Term products have a conversion option?
This allows you to convert your term policy into a permanent policy (such as whole life or universal life) with the same carrier.
The carrier will not require any additional underwriting when converting the policy. Most carriers require you to convert the policy before the Level Term Period expires or before age 70.
Despite the increase in premiums, conversions can be incredibly helpful if you still need coverage past your level term period.
Especially if you have health conditions that make you uninsurable.
Provides guaranteed coverage for a set period
Not permanent coverage
Does not build cash value
Now let's talk Whole Life Insurance.
What if you're interested in life insurance that is guaranteed to last your entire life?
Whole Life Insurance is the most well-known type of permanent life insurance.
Whole life insurance policies are typically guaranteed to age 121, which means that you do not have to worry about a term period expiring. Additionally, whole life insurance premiums never rise over the life of the policy.
Whole Life policies come with an additional benefit: cash value accumulation.
In a nutshell, there is a savings account inside a whole life insurance policy that grows over time.
You can use that money – known as the cash value – while you are still alive. This can be beneficial for you in several ways.
For example, you can take a low-interest loan from you policy’s cash value.
Additionally, if you are unable to pay your premiums, the carrier can deduct the premium payment from the policy’s cash value.
Also, if you determine that you no longer need your whole life insurance policy, you can withdraw all the cash value and “surrender” the policy.
Please don't be mistaken, Whole Life policies come at a cost.
Whole Life is typically the most expensive category of life insurance.
If getting the most amount of coverage for the least amount of money is the primary goal for you, you may be better off with another type of life insurance.
Provides permanent coverage
Builds cash value
Universal Life Insurance provides similar luxuries as Whole Life Insurance, but less expensive
If you are interested in permanent life insurance but whole life is too expensive, universal life insurance may be a solution.
With this type of policy, you have permanent coverage with premiums that are less expensive than a comparable whole life policy.
Guaranteed Universal Life (GUL)
GUL policies share some similarities with whole life policies: they are typically guaranteed to age 121 years of age and your premiums are guaranteed not to rise.
However, unlike whole life policies, GULs build little-to-no cash value.
If you want to save a few bucks on your premium, you can lower the guaranteed age of your GUL from 121 to 100, 95, 90, or even 85.
Be warned: if you live past the guaranteed age of your GUL, you no longer have coverage.
You and I should not mistake the “Guaranteed” in the name for Guaranteed Issue. All GULs require some form of underwriting.
More affordable than whole life
Does not build cash value
The amazingly luxurious Indexed Universal Life Insurance policy.
IULs are another type of permanent life insurance.
These types of policies do build cash value, but the way IULs accumulate cash value is complex and can be difficult to explain to you.
An IUL’s cash value is tied to a stock index, such as the S&P 500 or NASDAQ.
When the associated stock index is performing well, your IUL policy will accumulate cash value.
When the stock index is performing poorly, the policy may not accumulate cash value.
There may be additional components such as bonuses, multipliers, and fees that affect how your IUL will perform in the long run.
But not all (IUL's) have a no lapse guarantee.
If your policy is not performing well, you may have to pay increased premiums to keep it in force or the policy can lapse before you die.
In summary, IULs can be beneficial to you and may have a place in your insurance portfolio, but there are many moving parts to this type of policy that should be considered.
Builds cash value
Can be more affordable than whole life
Complex and more difficult to explain to clients
The death benefit isn’t guaranteed
Protect the ones you love with Final Expense Insurance
Put simply, Final Expense insurance covers funeral costs.
Since these are whole life policies, your premiums are guaranteed not to rise, and the death benefit is guaranteed to age 121 (100 with some Final Expense products).
Typically, these policies have smaller coverage amounts than traditional whole life – as low as $1,000.
Final Expense is usually marketed and sold to senior clients and it’s great for Medicare clients.
Some Final Expense options have no underwriting
These are known as Guaranteed Issue, so that even though you have failing health have some life insurance options are still provided.
Smaller face amounts to meet your client’s budget
Not intended for younger clients
I hope this quick article helped you to better understand the different types of life insurance available to you.