Life insurance is a risk management tool, but a unique type. It is unique because its primary purpose is to create an immediate pool of cash that is payable at the death of the insured person. Life Insurance contains very favorable legal and tax benefits that can provide for; (1) Income Replacement, (2) Business, Farm & Ranch Continuity, (3) Estate Planning, (4) Charitable Giving, (5) Supplemental retirement and Asset accumulation.
To meet diverse needs and to enhance the value of life insurance, different types of policies and features have been designed. While some life insurance policies focus exclusively on providing a death benefit, others also build cash value amounts within the policy that the owner of the policy may access to meet emergencies, help purchase a home, or pay for a college education.
• What are my options?
• Shouldn’t I just buy term insurance?
Term Life Insurance is a great option if you only need coverage for a short amount of time and/or have a limited amount of money you can allocate for your premium. Term insurance is less expensive than permanent life insurance; however, you may experience unexpected heath issues that affect your insurability for future terms.
• Why do I need it now?
Life insurance rates are based on the age of the applicant. Simply stated, the younger you are able to purchase coverage, the lower the rates will be. Purchasing life insurance when you are young and healthy allows for a smooth underwriting process and in the case of permanent insurance plans, it allows you to lock that low rate in for the rest of your life.
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Arguably the best form of life insurance, Whole Life is a way to keep coverage in force for your entire life. The rates are set and “locked-in” when you purchase the policy, providing a death benefit up to age 110. Whole Life policies also build a cash value that can be borrowed against, if needed. Several optional coverages are available for an additional premium, such as: Accelerated Death Benefit, Accidental Death Benefit, Automatic Premium Loan, Disability Premium Waiver, Guaranteed Purchase Option, and Spouse and Children Term Insurance.
Just as it sounds, a Single-Pay policy is a Whole Life product that is paid for in one, single premium payment. This could be a great option for a client with a large lump sum of cash available from such things as savings, inheritance, or retirement. The premium amount invested in this policy can be used to reduce estate size and therefore avoid estate taxes. Benefits paid under a Single Pay Whole Life policy may be tax-free and can be paid directly to the beneficiary, avoiding probate fees.
Instead of making premium payments for decades, with 10-Pay Whole Life the insurance is paid up entirely in ten equal payments made at the beginning of the policy term. This is a traditional, permanent life insurance policy with set rates and a death benefit payable up to age 110. 10-Pay Whole Life is great product to gift to children or grandchildren.
Auto-Owners offers a life insurance product designed specifically for children 15 days old through 17 years old. The rates are set at the time of purchase and coverage amounts are available from $10,000-$50,000. This is a death benefit policy, but also builds cash value over time. With Children’s Whole Life, the death benefit increases by 50% at ages 18 and at 25, with no increase in premium. For instance, a $50,000 policy purchased at age 2 would become a $75,000 policy when the insured child reaches age 18, and coverage would increase to $100,000 when the child turns 25.
Universal Life insurance is a more flexible type of permanent life insurance where the premium dollars are split between providing a death benefit and investments. The investments are made on behalf of the insurance company and are typically in safe, high-quality sectors such as bonds and mutual funds. The advantage of Universal Life Insurance is that the policyholder has the option to vary their premiums and payment schedule from one year to the next, based on their needs at the time. There is a guaranteed return on this type of investment; however, it is usually less than with other types of life insurance because managing the investments can be more complicated. When looking into Universal Life Insurance, be sure to choose a company that is well-respected and has a strong financial rating by A.M. Best.
Term Life insurance provides the most affordable option for life insurance coverage because it only provides protection for a set number of years. A Term Life policy can be valuable to a family or business by providing the financial means to pay for final expenses, a mortgage, business buy-sell agreements, children’s education expenses, business loans, or other miscellaneous debt.
Term Life insurance can be purchased to provide a death benefit for a 5, 10, 20, or 30 year period. The premium is only guaranteed for the specific term applied for, but optional riders can also be purchased to tailor the policy to meet specific needs. Optional riders for term insurance include: Guaranteed Renewability, Disability Premium Waiver, Accidental Death, and Children’s Term Life Insurance Benefit Rider.
The agents at Kasmann Insurance cannot begin to stress the importance of life insurance. It is not something people often want to think about, but it is one of those critical planning details in the grand scheme of things. We strive to regularly publish articles to our website specifically regarding this topic. For more information on estate planning, cash value, etc… please head over to our Life Insurance Corner.
At Kasmann Insurance, we write a majority of our life insurance products through our premier carrier, Auto-Owners Insurance Company. Check out these PDF documents to learn more about Strong Financial Ratings and Life Insurance Myths and Truths.
There are several different types of life insurance policies that offer different terms and conditions. As an independent agency, Kasmann Insurance has the ability to compare rates and plans from multiple companies and choose the best fit for your family’s needs. Give Kasmann Insurance Agency a call to find the best life insurance coverage for you today!