Life Insurance generally speaking comes in two forms: Permanent and term. Permanent Life Insurance can be either Whole Life or Universal Life. Permanent life insurance usually has a cash value feature that accumulates over time and can be accessed by the policy owner.
Term Insurance has a defined time period for coverage to be in effect (1yr, 10yr, 15yr, 20yr, 30yr, etc.). The insurance coverage would only be active during selected time period. Once the selected term period is reached, coverage ceases. The age-old question is: which is better Permanent or Term? The answer to that question is different based on each individuals’ goals and needs.
Whole Life Insurance is probably the most popular form of Permanent Life insurance. Mostly known for its ability to accumulate (cash) value over time. This can be viewed by insureds and policy owners as a bonus or living benefit. Cash value funds can be accessed by the policy owner basically anytime cash value is present in the policy. Accessing the cash value more than likely will affect the death benefit, mainly by decreasing it.
Whole Life Insurance can be purchased two ways: Participating and Non-Participating. Participating Whole Life Insurance is bought from Mutual Insurance companies. These companies pay dividends based on the company’s performance for that year back to its policy owners. Because of this, dividends are not guaranteed. A mutual Insurance company is owned by the policy holders. Non-Participating Whole Life policies can be offered by Mutual Insurance companies as well as Stock owned companies. Non-Participating Whole Life policies are usually less expensive than participating policies. Non-Participating policies are generally focused on return for stock holders in the company.
Final Expense life Insurance also known as Burial Insurance is designed to cover one’s final expenses at death. These expenses include things such as: funeral services, casket, plot cost, flowers, headstones etc.; Final Expense Life Insurance policies usually start at age 45 and can go as high as age 90. The underwriting or ability to qualify health wise for these types of Life Insurance Policies is more liberal or more forgiving then other types of Life Insurance Policies. This type of underwriting or health qualifying criteria is called Simplified Issue Underwriting. This type of underwriting accounts for certain health conditions such high blood pressure, or diabetes which an older person is more likely to have. These Simplified Issue Life Insurance Policies will in most cases have an immediate death benefit and sometimes a graded death benefit, which means the death benefit will pay an increased at certain points While the policy is in force. For example, coverage during the 1st yr. would be 25% of death benefit. The policies 2nd yr. would be 50% of death benefit. The 3rd yr. would be 75% of death benefit. The 4th yr. and beyond would be 100% of death benefit.
Guaranteed Issue Whole Life Insurance is just that. The policy is issued regardless of health as long as an age requirement is met. This type of policy usually has a two year wait on the death benefit, after which the death benefit is paid at 100% of policy face value. If death occurs inside of the 2yr period, the insurance company would return all premiums paid up to the point of death plus 10% normally.
Preneed plans are similar to final expense life insurance except for most times they are purchased from funeral homes. The insured would pre-purchase items needed for one’s funeral which locks in price at today’s cost. Preneed Funeral Plans always have defined payment period which are single premium (paid in full all at once). The payment periods range from 1yr, 3yr, 5yr, 7yr or 10yr.
Limited Pay Whole Life Insurance gives the option to pay up a life insurance policy by a set number of years such as 10pay, 20pay or by age Paid up at age 65.{{I would expand on this and add more details on what 10 pay means}} After the defined period has been met, the policy will be paid up requiring no more premium payments. These policies will have a cash value that continues to increase long after the premium payments stop. These types of whole life insurance policies are attractive for parents or grandparents taking policies out on younger insureds, or someone liking the idea of a defined period of premium payments.
Single Premium Whole Life Insurance are whole Life Insurance policies in which one lump sum premium is paid with no premiums required. The policy is then paid up and has immediate cash value that continues to grow long after the single premium is paid. A common use for these policy types is a strategy called wealth transfer. For example, say a grandad has funds set aside that he desires to go to a grandchild upon his death. If the grandad took that money and purchased a single premium policy two things would happen instantly. First, the grandchild would receive the funds at the time that granddad would have wanted him or her to receive it, at his death. These funds would be paid out free of taxes and free of probate issues. Secondly, the amount that would be transferred would be increased instantly from original amount. Also, this strategy has favorable tax treatment as well.
Indexed Universal Life Insurance is the newest addition to the life Insurance family. Indexed Universal Life Insurance is mostly sought out for its ability to grow considerable cash value over time by participating in market gains but never losses. This creates a relatively low risk high gains potential cash value accumulation for policy owners.
There are considerable tax advantages that come with a Life Insurance policy. First off, the death benefit will go to beneficiaries’ tax free no matter if the policy you have is permanent or term. Permanent Life Insurance offers additional tax advantages beyond the death benefit. Cash value in Permanent Life Insurance can be accessed tax free using strategies designed to avoid taxation. Because of this favorable tax treatment by the IRS, many find Permanent Life Insurance to be an important addition to any retirement portfolio.
Term Life Insurance is straight forward pure Life Insurance coverage with no bells and whistles. Void of cash value and the paid-up features of permanent life insurance, it is by far the most affordable way to purchase life insurance. Term life insurance also allows owners the ability to access higher amounts of coverage without breaking the bank, Term life insurance is excellent for covering large amounts of debt or insuring a standard of living if something where to happen to a breadwinner or major income earner in a family. Term insurance always has a defined time period for the death benefit to be in force. Examples are 1yr, 10yr, 15yr, 20yr, 30yr term periods. After the term period is up insurance coverage ceases.
Clarence prides himself on being honest and trustworthy with his clients. He provides a wide range of information on plan comparisons and breakdowns. Educating clients is important to Clarence because he feels an educated decision is the best decision.
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CK Insurance Solutions
Clarence M. Kemp
1010 E. Adams St. Ste 129
Jacksonville, Fl 32202
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