It’s easy to understand the importance of life insurance: to help maintain stability for those who depend on your income. Life insurance is a crucial step in planning for your future and your family’s future. It can fulfill promises and obligations to your family if you are no longer living. The death benefit is income tax-free and can be used to cover funeral expenses, repay debt, provide education, pay estate taxes or any other expenses your survivors may incur. Life insurance may also be used to help ensure that a family business will pass to your intended survivor. There are also benefits to certain types of life insurance plans during your lifetime.
What isn’t always easy to understand, however, is the broad range of choices available on the life insurance market. Which approach is right for you? Term life? Whole life? How much coverage do you need to protect the future of your loved ones?
For starters, here are some basic terms to know to get a better handle on your life insurance needs—and to help you make sure those who depend on you will have what they need if the unthinkable happens:
- Term Life Insurance: A form of life insurance in which your premiums pay for a set amount of coverage for a specific period of time—for example, a $500,000 benefit payable to the beneficiary if the insured should die during the 20-year period from 2019 through 2039, with fixed premiums payable during the entire term. With a term life policy, if the insured lives beyond the end of the term, there is no benefit or “cash value” payable. As a rule, term life policies have the lowest premiums of any life insurance option available for any given benefit amount.
- Whole Life Insurance: Whole life policies provide coverage for a lifetime. They also accumulate cash value as premiums are paid, with a possible tax benefit. In some circumstances, the insured may be able to access the cash value while still living. If the insured reaches a life situation in which the policy is no longer necessary, the option to cancel the policy and receive a payment for the cash value may be available. For any given benefit amount, whole life policies generally have higher premiums than term life policies.
- Universal Life Insurance: Another form of lifetime coverage, Universal Life Insurance provides some options to vary the amount of the premium payments and to choose among different investment options for the cash value. Adjustments to the premium amount are based on adjustments to the payable death benefit, providing flexibility in either direction as coverage needs change over a lifetime. Like whole life insurance, premiums as a rule are higher for any given benefit amount, assuming other factors, such as age and health, are equal.
If you’re ready to take a deeper dive into the details, an online guide called “What You Need to Know About Life Insurance” is available.
That said, there’s no substitute for the expertise of our specialists here at Collens-Wagner. Let them put their decades of experience helping families in greater York, Pennsylvania, to work for you. We’ll show you how you can have peace of mind, knowing that a solid plan is in place to support recovery and prevent financial devastation following an unexpected, unfortunate event.