Life Insurance Anderson SC can ease your family’s financial burden when you die. Your beneficiaries receive a payout called a death benefit that can be used for anything they choose.
You can select the type of life insurance you need based on your current and future needs. Factors include your health, lifestyle, and other factors.
The death of a loved one can have a dramatic financial impact on survivors, often straining already tight budgets. Choosing the right life insurance policy to help protect family members’ futures can make all the difference.
The basic purpose of life insurance is to provide a lump sum of money that will pay your chosen beneficiaries (typically spouse, children, or other relatives) if you die. Depending on the amount and your needs, this may cover expenses such as funeral costs, debt, or college tuition.
Term life insurance is typically less expensive than whole-life coverage, and it offers death benefits for a set period, such as 10, 20, or 30 years. It can be a good choice for fiscally-minded individuals who want to lock in low rates while they are still young and healthy.
A key factor in determining cost is the insurance company’s ability to assess and underwrite your risk. This typically involves a medical exam and questions about your occupation, lifestyle and other factors. Certain hobbies, such as scuba diving, may be deemed to be risky to your health and could raise your rates.
Some life insurance companies allow you to include your first premium payment with your application, giving you temporary coverage while your application is being processed – this is called “accelerated underwriting” and can be helpful for people with poor health.
When choosing a life insurance policy, look for the company with a high rating of financial strength. You want to be confident the company will be around when you need a payout years or decades down the road. A Primerica representative can explain the ratings and help you choose the right policy for your unique circumstances.
Whole Life Insurance
Whole life insurance provides permanent coverage with a fixed premium and death benefit. It also includes a savings component that builds tax-deferred cash value over the life of the policy. This money can be withdrawn or borrowed in a time of need. However, if the amount withdrawn exceeds the total death benefit or is not repaid, it may reduce the death benefit that beneficiaries receive.
The cash value portion of a whole life insurance policy accrues interest on a tax-deferred basis, similar to an investment account like a 401(k) or IRA. The rate of growth depends on the particular policy, but typically a portion of each premium payment is applied to building the cash value. This allows the policy to be self-sustainable. This is an attractive option for people who want the protection of a permanent life insurance policy and have an ongoing financial need to cover final expenses.
Whole life policies are typically more expensive than other types of permanent life insurance policies. For this reason, it is important to carefully consider your needs and understand how this type of policy fits into your overall financial plan. A qualified financial professional can help you develop a strategy to meet your specific goals and objectives.
Some whole life policies allow you to front load the initial premium for a limited period of years, such as 10 or 20. This reduces the premium to be paid each year over the life of the policy, but the premium will increase significantly upon expiration.
Whether or not you choose to add whole life insurance to your financial plans, it is critical to ensure you get a quality product from a company with strong financial strength ratings. There are a number of reliable independent sources that can provide financial strength ratings for companies, such as A.M. Best, Moody’s, Standard & Poor’s and Fitch. Adding life insurance is one of the most significant financial purchases you can make. It is essential to discuss your options with a qualified financial professional who can recommend solutions that fit your unique situation.
Universal Life Insurance
A universal life policy, also called a cash value insurance policy, offers some of the benefits of whole life coverage but is more flexible. It’s also often less expensive. Unlike whole life policies, which have fixed premiums and death benefit amounts, a universal policy allows you to increase or decrease your premium payments within certain limits set by the insurer. This flexibility helps to make it more affordable for those with variable incomes. The death benefit of a universal policy is paid to your beneficiaries tax-free, and it can be used to cover the loss of income due to a divorce or illness, pay off a mortgage or other debt, and provide for funeral costs.
Some versions of universal life insurance offer a guaranteed interest rate, which will help to ensure that your accumulated funds don’t lose value over time. However, these policies typically have higher premiums than other types of universal life insurance.
Other variations of a universal life insurance policy allow you to invest your accumulated funds into market-based investments. These investments can potentially earn a greater return than traditional whole life insurance policies, and in turn, they can lower your premiums. These policies are sometimes called indexed universal life insurance.
If you’re interested in a universal life insurance policy, talk to your financial professional about the different types of this type of coverage. They can help you determine which one is right for you based on your unique needs and situation.
Regardless of the type of universal life insurance policy you choose, it’s important to be aware that making withdrawals or taking out a policy loan from your accumulated funds could deplete your cash value and possibly cause your policy to lapse unless you add extra premium payments. Also, because this type of policy is based on market-based investments, it requires more active management than other life insurance policies.
In recent years, some universal life insurance policies have lapsed due to the inability of the cash value component to keep pace with the rising cost of the life insurance. In order to avoid this, some companies now offer no-lapse guarantees in their universal life insurance policies.
Variable Life Insurance
Variable life insurance is a form of permanent life insurance that combines a death benefit with an investment account. It consists of separate accounts that contain various instruments and investment funds, which means it’s considered a securities contract and therefore has some investment risks. As a result, it can be more expensive than other types of life insurance, like term life.
The death benefit of a variable life policy varies, depending on how the separate accounts perform. However, the death benefit is usually guaranteed to be at least equal to your premium payments and the cash value of the policy. It can also be higher than the face amount of the policy.
While the investment component of a variable life policy gives it a more permanent structure than other forms of life insurance, it comes with its own set of fees and expenses. Sales and surrender charges are applied when you buy or sell a policy, and administration fees cover essential policy activities. Loan interest and mortality risk fees are also charged, but these are less significant than other charges such as transaction fees.
With a variable life policy, you have the option to invest your cash value in various asset options, such as mutual funds. The value of your account depends on the performance of these investments and how much you pay in fees and other costs. You may also have the option to put some of your cash into a fixed account that earns a steady rate of interest and helps reduce investment risk.
Another issue with a variable life policy is the fact that its gains are taxed on a regular basis, rather than the more favorable capital gains rates. Likewise, if you borrow against your cash value, you’ll be subject to federal income taxes on the amount you take out.
It’s important to understand these differences and consider the alternatives to a variable life policy before making a decision. For example, term life policies are often sufficient when it comes to supporting your family’s financial needs for a specific period of time, and you could invest the remainder of your savings in an investment account that would provide greater growth potential than a whole life or variable universal life policy.
