Term life insurance provides protection only. There is no cash value and it expires at a certain date. (i.e.: ten, twenty or thirty years). Permanent life insurance builds cash value. The permanent death benefit grows tax free. This can be borrowed against for life’s circumstances such as home improvements, education and unexpected expenses.
How much life insurance should I have?
Human life value which is fifteen to twenty times your earnings, is the right amount of life insurance to protect a family.
How can I afford it? (no out of pocket outlay)
Life insurance can be affordable through a series of revisions to your cash flow. Many of our clients fund their policies without changing their lifestyle. This is a wonderful idea when it comes to purchasing life insurance.
What is my rate of return?
Term life insurance has no rate of return. Whole life insurance on average is between 3% and 5% tax free, thus serving as a bond like yield in an overall portfolio.
Do I need any extra if I already have life insurance through work?
Most often, yes. Typically through your employer one only has two times their income as their life insurance benefit. Your human life value is upwards of twenty times your income. Clearly, many people are dramatically under-insured.
Do I have to pay taxes on the cash value and the death benefit?
No. A major advantage under insurance tax law is that assuming the policy is set up properly, there is no tax on the cash value and no tax on the death benefit.
How safe are the insurance companies?
We typically work with mutual life insurance companies, all of which have been in existence for over 100 years. In fact, banks have some of their own assets inside of life insurance companies. Simply put, whole life insurance issued through mutual insurance companies has a high degree of safety.
What is a good age to consider purchasing life insurance?
Life insurance should be purchased at the earliest age possible, securing your health and the maximum coverage you can get.
Can I take a loan against the cash value in my policy?
Yes a non-direct recognition loan allows for the cash value to still grow even though there is a loan against the policy. Thus, not interrupting the exponential growth on the cash value. This reason in and of itself is one of the best reasons to consider whole life insurance as part of your overall insurance program.
What happens if I become disabled?
Assuming one can medically qualify, the life insurance policy should be issued with a disability waiver. This means, if a client becomes disabled, the life insurance premium after a brief waiting period would be funded by the life insurance company. In some cases all the way to the age of 65. Thus, it would be self-complete, even in the event of disability. This is another great feature to reduce risk.
Can I use the cash value to offset my children’s college cost?
Yes. You can borrow against the cash value of your whole life policy to fund education and then pay back the loan with future cash flow. All the while, the cash in the policy will still grow. In many instances, the cash value also is not reportable on financial aid forms.