Life Insurance Basics

Even though life insurance may be one of the most boring financial topics on the planet? It is actually one of the most important financial decisions anyone makes for their family. Life insurance comes in a variety of forms and there are several different strategies that can be used with life insurance. Here are some of the basics.

Term Life Insurance

  • Living Benefits
  • Return of Premium
  • Non Medical Exam Life insurance

Permanent Life Insurance

  • Whole Life, Equity Index Universal Life, Universal Life
  • Cash Value Accumulation with Tax FREE Growth
  • Retirement & Estate Planning tool
  • Long Term Care Benefits

Final Expense

  • Typically for older adults above 55
  • In most  these policies are guaranteed issue
  • Typically the death benefits are smaller from $10,000 up to $50,000.

Term Life Insurance
Term life insurance is the most basic form and least expensive type of life insurance policy to buy. Term periods can be chosen between usually 5-30 years. Your premium is guaranteed for whatever term you choose. Most policies require a medical exam to qualify, but in today’s market there are also some very attractive non-medical exam policies available up to $500,000.
Return of Premium Life insurance is a product that pays you back all your policy premiums if you out live your term coverage. It is popular among younger life insurance buyers who feel they will live longer than the 20-30 year policy that may be purchased
Living Benefits are policy riders that allow an insured to access a portion of the death benefit if they become critically or terminally ill to help pay medical expenses.
Permanent Life Insurance

Two of the most popular permanent insurance policies available are Whole Life policies (which yield a guaranteed fixed return) and Indexed Universal Life policies, which allow for participation when the market goes up and principal protection if the market goes down. Invariably, permanent life insurance decisions fall into two distinct objectives:

  • Highest Internal Rate of Return (IRR) on Death, or
  • Highest Internal Rate of Return on Cash Value Accumulation.

Some policies try to solve both problems, but that is almost always a sub-optimal solution, because no policy can do both extremely well. If you’re buying life insurance for liquidity at death, the policy design and premium structure will differ greatly from a life insurance purchase to fund stream of income at retirement.

These type of policies may seem difficult to understand, but can be very effective long term financial tools.  In today’s market many policies also offer the same living benefits as mentioned above plus Long Term Care options.
Final Expense
Final exspense insurance is the most targeted area of life insurance for seniors. Final expense does take the pressure off your heirs to settle your estate after your passing. It is typically guranteed issue so medical exams are involved. The most affordable policies usually offer coverage amounts up to $50,000. In some cases you may see up to $150,000 in coverage, but those policies can be expensive.