People purchase life insurance to help pay for final expenses, outstanding debt and to leave a financial legacy. It can also help with estate planning.
Life Insurance Anderson policies are usually paid out to a beneficiary upon the insured’s death. However, some specific exclusions exist such as suicide and homicide.
The death of a loved one is a tragedy, but it’s also an emotional and financial blow that can have far-reaching effects. Fortunately, life insurance can help cushion the blow by providing a lump sum payout that your beneficiaries can use to settle debts and other expenses. But which type of policy is right for you? Term and whole life policies are two of the most common options.
Term life insurance offers coverage for a set amount of time, such as 10, 20, or 30 years. If you die during that period, your beneficiaries will receive a cash benefit—which is typically tax-free. You can also choose to purchase a renewable term policy that gives you the option of renewing your coverage at the end of its initial term. However, the premiums will be higher if you do so because of your age and any health changes that may have occurred during that time.
Most term life policies require you to undergo a medical exam and answer health questions as part of the underwriting process. However, you can avoid the medical exam and questionnaire altogether by choosing a simplified or guaranteed issue policy. These policies have higher premiums, but you won’t be required to undergo a health screening.
Another way to compare life insurance policies is to look at the company’s financial strength ratings. This indicates how likely the insurer is to be around if you need to claim your payout in the future. You can find a list of life insurance companies with the best financial strength ratings on NerdWallet.
The benefits of a good life insurance policy are plentiful, but it’s important to choose the right one for your needs. You can begin by using our free life insurance calculator to estimate how much coverage you’ll need to cover your family’s expenses in the event of your death.
Then, find a licensed agent or broker who can help you understand your options and choose the right policy for your situation. It’s a good idea to work with an agent who has earned the Chartered Life Underwriter (CLU) designation, which means they have demonstrated expertise in life insurance. You can also check your state’s department of insurance website for licensing information.
Whole Life Insurance
Whole life insurance is a permanent policy that guarantees lifetime coverage, a death benefit and cash value growth. Whole life is a good option for individuals who want to ensure their families have an income after they die, especially if there is one primary breadwinner in a family. It also gives people the opportunity to build a savings component that can be used to supplement retirement funds and other financial goals. Whole life policies are more expensive than term life.
Whole Life insurance builds a tax-deferred cash value in addition to the premium you pay. This money can be accessed through a loan or withdrawal. However, it is important to note that any loans or withdrawals taken from a whole life policy can decrease the amount of money your beneficiaries receive upon your death.
Some whole life policies may even pay out dividends to the policyholder. These are essentially investment returns on the money that has been paid into the policy over time. The way that the money is used by the policyholder is completely up to them. In order to determine if a whole life policy is right for you, it is important to assess your current and future financial needs.
During an initial consultation, your Thrivent financial professional will take the time to understand your full financial picture. They will help you identify gaps in your portfolio and make recommendations to address them. They will also work with you over time through periodic reviews and ongoing guidance to make sure that your strategies are on track to meet your goals.
Whether you’re looking to cover your final expenses or leave a lasting legacy, whole life insurance offers a number of benefits. It provides permanent protection with a guaranteed death benefit, set premiums that won’t increase, and a potential for accumulated cash value and dividends. To learn more about whole life insurance and how it can fit into your financial strategy, connect with a Thrivent financial professional today.
Universal Life Insurance
Like whole life insurance, universal life policies provide long-term protection in exchange for a premium. However, UL policies are more flexible, allowing you to adjust your premium payments and death benefit amounts within certain limits. They also offer a cash value component similar to a savings account that accrues interest. In addition, the death benefit can be used to pay for things like long-term care or chronic illness coverage. Generally, the death benefit and accumulated cash value are payable to you upon surrender. However, some policies deduct a front-end or back-end charge if you choose to cancel the policy.
Unlike term life, a UL policy can last for as little as fifteen years or as long as you live as long as you continue to pay premiums and maintain a positive cash value balance. As such, UL policies are ideal for people with changing financial needs who want a permanent solution that can grow with them over time.
Most UL policies allow you to increase your premium payments and decrease them if your income fluctuates, giving you the flexibility to adapt your policy over time. In addition, a UL policy’s cash value grows over time and is available to borrow against or cash in at any time, while the investment portion earns tax-deferred interest.
There are several different kinds of UL policies, each offering unique benefits. Guaranteed UL policies are the least risky, offering a fixed rate of interest to help your cash value accumulate more slowly. Indexed universal life policies have a cash value portion that’s invested in various sub-accounts tied to market indexes, generating higher potential gains than a traditional UL policy but with more risk.
Variable UL policies have a cash value portion that’s tied to your choice of investment sub-accounts, giving you the opportunity to earn more or less money than with other UL plans. These kinds of policies are typically more expensive than guaranteed UL or indexed UL, though, because they require you to make your own investment choices and take on more risk. If you’re interested in a variable UL policy, we’ll be happy to explain your options and help you decide which one is best for you.
Variable Life Insurance
Variable life and variable universal life, or VUL, policies offer the potential for growth in addition to a death benefit. But it is important to understand the policy fees and risks involved.
Unlike whole life insurance, the cash value in a variable life or VUL policy is invested in subaccounts that allow the opportunity for growth based on market performance. The investment portion of the policy receives favorable tax treatment. However, if the investments perform poorly, the cash value total can drop and your policy may terminate.
Like other permanent life insurance, VUL policies include a death benefit that your beneficiaries can claim when you die. The amount of the death benefit is based on the sum of the policy’s face value and the cash value accumulated, but is not guaranteed. VUL policies also allow you to adjust the death benefit and premium payments within certain limits.
However, because the death benefit is not a fixed number, and you can change your payment amounts within certain limits, VUL policies are complex. They also require a larger cash need, long time horizons and more volatility than other types of life insurance.
Many variable universal life policies have a “target” death benefit that is calculated using assumptions about the cash value’s performance, such as an assumed rate of return of 4%. The insurer projects that, if the cash value meets this target, the death benefit will be equal to the policy’s face amount when you die. However, the death benefit can decline if the cash value falls below the target.
VUL policies often have additional charges associated with transferring money between investment options, partial withdrawals and obtaining policy illustrations. Some of these fees are charged by the insurance company, while others are passed on to you as a percentage of your net amount of risk. It is important to speak with a financial professional to fully understand these and any other fees that may apply.
VUL policies are regulated by the Securities and Exchange Commission and must be sold by a licensed life insurance professional. In order to sell them, a life insurance agent must meet stringent licensing requirements, including passing a series of exams and training courses.