When you pass away, who will pay your mortgage? Who will pay for your children’s college tuition? Will your family have to downsize due to financial stresses? A life insurance policy can help mitigate these concerns. Review your policies regularly to make sure they are still meeting you and your families needs. Life insurance isn’t about you, it’s about those that depend on you.
Life insurance is also used in business. Imagine one of your most successful sales employee passes away. How will you replace them? How will you replace the income they generate? A life insurance policy on your key employees can help ensure that their passing will not cause a financial hardship for your business. Life policies can also help fund a critical buy/sell arrangement for a busines owner who is looking to retire and start exit planning.
If you have people in your life that depend on you, including family, business partners and employees, then life insurance should be part of your Risk Management plan. Contact an Advisor at Hummel Group at 800-860-1060 for more information about life insurance.
This is the simplest and generally the cheapest form. You buy coverage for a specific period of time. It can usually be renewed, but premium will increase based on age and health factors. There is no cash value.
All other types of life insurance are permanent, but there are several varieties. They all include a savings element that builds cash value, in addition to the death benefit. Once that cash value accumulates, it is accessible to the policyholder tax-free.
You purchase this policy to cover your entire life, as long as you keep paying premiums. Premiums remain constant throughout the policy, and the company invests a portion of your premium that becomes the cash value. These are more expensive than term policies in the early years, but they even out because the premium does not increase.
The policy is similar to whole life, but has the potential for higher earnings on the savings component. It is more flexible in terms of changing premiums and face value throughout the policy. There is usually a guaranteed return on the cash value. Disadvantages include higher fees and the possibility of increasing premiums.
A variable life policy generally has fixed premiums, and you have control over the investment decisions for the cash value portion. However, this is riskier because there is not guarantee for the cash value.
Guarantees are based upon the claims-paying ability of the issuing insurance company. Guarantees do not apply to the investment performance or account value of the underlying variable portfolios.
Life insurance cash values grow without being subject to current taxation. Cash values can be accessed by way of policy loans without being subject to taxation. However, if tax-free loans are taken and the policy lapses a taxable event may occur. Loans and withdrawals from life insurance policies classified as modified endowment contracts may be subject to tax at the time the loan or withdrawal is taken, and if taken prior to age 59 1/2, a 10% federal tax penalty may apply. Withdrawals and loans reduce the death benefit and cash surrender value. Always consult with a tax adviser regarding your particular situation.