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Basics of Life Insurance Planning

There are two basic type of life insurance: Term and Permanent

Term Life Insurance is the most basic type and is designed to provide coverage for a specified period of time, usually 10 to 30 years, in exchange for a monthly premium (payment). This type of insurance is usually the most affordable option for individuals under the age of 50.

Permanent life Insurance lasts for the insured person’s entire life, as long as premiums are paid. Permanent policies combine a death benefit with a savings account. The cash value that accumulates with this type insurance can later be withdrawn or taken out as a loan against the policy.

There are two main types of permanent insurance: Whole and Universal

Whole Life Insurance is designed to insure someone for their “whole” life. With Whole Life, you have a guaranteed premium, interest rate, and death benefit for the life of the policy. The cash value grows tax-deferred and also typically allows for withdrawals and loans against the policy. One major advantage to this type of policy is that you can cancel it and receive the accumulated cash value.

Universal Life Insurance is similar to Whole Life as they both have cash value that accumulates in a tax-deferred savings account over time. However, Universal Life policies have a greater degree of flexibility over a traditional Whole Life policy. Universal Life policies give you the ability to adjust the premium and the benefit amounts over the term of the policy. There are several types of Universal Life plans available, including a Variable Universal Life policy, which allows you to invest the cash-value portion in a variety of investments such as mutual funds.

Specialty Life Insurance Plans

Linked (or Combination) Life & Long-Term Care Insurance provides two forms of valuable protection in one policy. Some plans offer recurring premiums while others require a large single premium. Like all life insurance policies, they pay a death benefit to your beneficiaries. However, what sets them apart is the ability to deduct from your death benefit the amount you may need to pay for long-term care costs. Some permanent life insurance plans will allow you to purchase an optional rider for long-term care coverage.

Final Expense Insurance is a small life insurance policy designed to cover the immediate costs associated with a death, such as burial, cremation, casket, funeral service, headstone, burial plot, etc. In 2012, the average cost of a funeral alone exceeded $8,000. Though most people don’t like to talk about end-of-life issues, they also want don’t want to place this financial burden on their loved ones.

If you intend to purchase permanent protection in the future, a Plus policy may offer you a better value.

Are you ready?

Look at what you can afford by contacting James Insurance Group today. Then ask yourself … can I really afford not to?

Talk to our James Insurance Group representative to find out more about Basics of Life Insurance Planning.