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Your life insurance needs will depend on a number of factors, including the size of your family, the nature of your financial obligations, your career stage and your goals. For example, when you're young, you may not have a great need for life insurance. However, as you take on more responsibilities and your family grows, your need for life insurance increases.
Here are some questions that can help you start thinking about the amount of life insurance you need:
- What immediate financial expenses (e.g., debt repayment, funeral expenses) will your family face upon your death?
- How much of your salary is devoted to current expenses and future needs?
- How long will your dependents need support if you were to die tomorrow?
- How much money will you want to leave for special situations upon your death, such as funding your children's education, gifts to charities, or an inheritance for your children?
- What other assets or insurance policies do you have?
Life insurance and annuities are unique assets. Because of their tax-favored benefits, they can be used to solve some of life's most perplexing problems. Retirement planning, estate planning, college education and family protection are just a few of the financial objectives that may be met with insurance and annuity products.
As insurance licensed agents, we have access to a wide array of insurance and annuity products. Recommendations are based on your specific financial objectives, and then matched to the product(s) that meet those needs.
Before deciding whether to buy term or permanent life insurance, consider policy cost and potential savings that may be available. Also keep in mind that your insurance needs will likely change as your family, job, health and financial picture changes. Therefore, you will want to build some flexibility into the decision-making process. Following are some common reasons for buying life insurance and which type of insurance may best fit the need.
Essentially, life insurance provides a death benefit when the insured individual becomes deceased; however, life
insurance can be so much more. It is unique in that it can be used as an investment tool to leverage your finances.
Advantages of life insurance include:
- Policy cash values will accumulate on a tax-deferred basis
- Policy death benefits are received income tax-free
- Policy cash values may be accessed on a tax-advantaged basis
| Comparison of Types of Cash Value Life Insurance |
|
| |
Whole
Life |
Universal Life |
Variable Universal |
| Earnings grow tax deferred |
Yes |
Yes |
Yes |
| Cash value may be withdrawn tax free* |
Within limits |
Within limits |
Within limits |
Policy loan proceeds received tax free*
(Note: Special tax rules apply if policy is later cancelled) |
Yes |
Yes |
Yes |
| Policy owner controls choice of investments |
No |
No |
Yes |
| Policy owner can change premium payment amount |
No |
Yes |
Yes |
| Policy owner can control premium payment timing |
No |
Yes |
Yes |
| Cash value growth guaranteed by insurance company** |
Yes |
Yes |
No |
| Partial withdrawals of cash value allowed* |
Yes |
Yes |
Yes |
| Policy loans allowed* |
Yes |
Yes |
Yes |
| Cash values may be used to pay monthly deductions* |
No |
Yes |
Yes |
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