Life Insurance – Protecting your Family and Business After You are Gone

Most people don’t like to think about death, especially their death and as a result, most people don’t like to think about life insurance. But for most people life insurance is a necessary element of our society. We use it to cover final expenses such as burial costs in order that such burdens are not placed upon family members. But we also use life insurance to ensure that our spouse and children have sufficient funds for their needs, including mortgage payments, school tuition, and debt repayment. According to an estate planning attorney, life insurance is also used as a key component of estate planning. It can pay for capital gains taxes and provide cash for settlements to family members when ownership of family businesses must be resolved.

Most banks offer life insurance that is not underwritten-at time of death the health history of the deceased is examined and the death claim MAY BE REFUSED!

Insurance offered by brokers are medically underwritten. This means that once approved the insured person knows that he or she has acquired the life insurance and it will continue as long as the premiums are paid or until a predetermined expiry date or event (age 100 or death) is reached.

Over time, both Universal and Whole Life insurance will accumulate or “store” cash value. This cash value can be accessed to continue paying premiums in the event the client meets with some temporary misfortune and becomes unable to pay premiums.

Bear in mind that Life Insurance pays upon death….it is not a substitute for Income Replacement (Disability Insurance) or Health Insurance.

There are 3 Types of Life Insurance:

1. Term Insurance:

Term Insurance is for a specific length of time; most common are 10 and 20 year terms. The policies are generally renewable for another period of time, but at a higher rate as the insured person is now 10 or 20 years older. Live beyond the term period and the policy expires (if not further renewed) and the result is there is no payout of the insured amount.

Term insurance has the advantage of being cheaper than either Whole Life or Universal Life insurance. It is ideal for the family starting out, when family income is generally lower and the needs (especially where there are children in the family) are much higher.

Term insurance is offered as part of a group health benefit plan and is based upon the employer’s choice of a flat amount such as $25,000 or $30,000 or a multiple of the employee’s annual earnings, most common 1 x annual salary. Should the employee leave the company, the coverage expires. Often this is not nearly enough and families should be looking to purchase their own separate insurance policy.

Term insurance is often purchased by corporations on behalf of key persons and the corporation is the beneficiary. No taxes are payable provided the company has not deducted the premium expense from its income.

An exception: Term-to-100 is term insurance that will pay out to the insured upon attainment of age 100.

Most term policies carry a conversion option, i.e. conversion to a Universal Life or Whole Life policy without additional medical underwriting…..the advantage is that you could become unhealthy through the passing years and would otherwise be declined.

2. Universal Life Insurance:

Universal Life insurance consists of two components-a life insurance component and a savings/investment component. There is no expiry period on a universal life policy except death or the age of 100 in which case the value of the policy is paid to the insurer or the insurer’s beneficiary.

The insurance component requires premium that covers the pure cost of insurance plus administrative charges.

The savings/investment component takes a portion of the total premium and funnels it into an investment portfolio determined by the insured. It is flexible in that it allows (within limits) the insured to make additional contributions to the investment. The earnings on this investment grow within a tax-sheltered environment and both investment and earnings can be accessed when needed, either in the form of a loan from the insurance company or some banks, or a complete withdrawal. Some tax on the earnings may be assessed.

Universal Life insurance may also be paid up insurance, meaning that the payment plan could be at the insured’s option, payable over a set number of years, after which no further payments are required to keep the policy in force until the expiry period mentioned above.

The client has the choice of purchasing a “fixed” amount of death benefit or “increasing face” consisting of the face amount of the policy plus the cash value.

3. Whole Life Insurance:

This type of policy is somewhat similar to Universal Life in that it consists of the pure cost of insurance, administrative charges and investment. But there is no say by the policy holder regarding the types of investment made by the insurance company. This may not be a bad thing as insurers are generally more competent at making investment decisions than the average individual.

For more information on affordable life insurance, contact Morgan National Corporation today at 1-866-595-3533.  Let us help you protect your future with a line insurance policy tailored to your specific needs.