Life insurance maybe one of the most important insurance products you will even own. It is a foundation for the financial security for you and your family. In the event of your untimely death life insurance would pay a death benefit to the elected beneficiary. It protects your financial resources against the uncertainties of life so you can plan for the future. If you have anyone in your life that depends on you financially then there is a good chance you need life insurance. It helps to insure that your family could continue on without a financial hardship if you were to pass prematurely.
There are certain stages in life when you would want to purchase life insurance including – getting married or divorced, buying a home, having children, starting a business, taking on debt, etc.
There are also business uses for life insurance as well. Business partners should own a life insurance policy on each other, referred to as a cross purchase buy sell life policy. This would protect the business and allow the surviving business partner to buy out the spouse of the now deceased partner.
The two main types of life insurance are term insurance and permanent insurance.
Term life insurance provides a level death benefit and a level premium for a stated period of time usually 10, 15, 20, 25, or 30 years. The initial premium for a term plan is much less than a permanent policy so it makes it a popular choice for those looking for a specified death benefit for a specific period of time. It is pure protection and there is no cash value accumulation. Young families generally find a term plan a good option to allow them to have the high death benefit amount they need at an affordable premium. For most families as they enter retirement the need for a life insurance policy has diminished. For example it is likely that their kids have grown, their debt is paid off, and they have a retirement income and plan to carry them through their retirement years. One provision that is an important part of a term policy is called convertibility. This feature allows you to convert your term policy to a permanent policy without having to prove insurability at the time of conversion. This can be a very valuable feature which allows the insured to have options based on changing circumstances. This is one of the many reasons why talking to a knowledgeable insurance broker is so important.
Permanent life insurance includes policies such a whole life, universal life, indexed universal life among others. These policies provide lifelong protection and the ability to accumulate cash value often on a tax deferred basis. Unlike term insurance a permanent life insurance policy will remain in force as long as the premiums are being paid. The cash accumulation feature is often the most intriguing part of permanent policies. You have the ability to borrow, or take a loan against the value of the cash that has accumulated within the policy. These types of policies can even be set up to create distributions at retirement age. There are many possibilities with these types of polices based on what your specific needs and objectives are. It is important to work with someone who can help you design a life insurance plan that will accomplish your goals. It is quite possible that the best solution may include both a term and a permanent life insurance policy.
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