Life Insurance

November 1, 2015

Life Insurance

 

Questions on Life Insurance?  We can help.  Doctors Wealth Care is trained and licensed to provide you and your family with the protection they require.  Life Insurance for us is is one of the financial products that lies at the root of our planning process.  Families that can "self insure" against this need are few and far between and due to this, life insurance is typically something most clients like to set up properly and check off the financial to do list.  We are firm believers that a proper financial strategy has to do more than just provide a rate of return and assisting our clients with setting up their life insurance falls directly into that category.  We must make sure that families have their lives in order and "ducks in a row" prior to moving past protection elements.  Along with the proper amount of life insurance we feel that families should also have a proper amount of Disability Income Insurance as well as Auto, Home and Umbrella insurance.

 

One of the first questions people ask us is simply:  "What kind of life insurance should we purchase?"

 

The answer is simple... It depends and no one product makes sense for everyone.  The basics are simple though.  There are two main types of life insurance and a few subtypes. We'll cover the most common here:

 

TERM LIFE INSURANCE:

 

Term life insurance is by far the most commonly purchased type of insurance as the qualities it possesses are conducive to a wide range of financial situations.  With this type of insurance you are purchasing a life insurance policy that provides a death benefit if the insured passes away prior to the expiration of the policy.  When does the policy expire you ask?  That part is up to you when you purchase the policy.  You can choose to purchase a policy that expires in 10 years, 15 years, 20 years, 25 years or even 30 years provided the insurance company approves you medically and financially.  If you were to purchase a $1 million 10 year level term life insurance policy when you were 30 years old for instance you would be insured from 30 to 40.  Your chosen beneficiary would receive a death benefit if you passed away during those years.  If you were to outlive this time your insurance is typically going to simply expire.  For the above referenced examples most of these would fall under the category of Level Term Insurance.  This means that for those years the insurance company will charge you the same rate for your insurance for all years insured until the policy expires or if a death were to occur.

 

Another common type of insurance that works slightly different, but still falls into the "Term" category is a product commonly referred to as Yearly Renewable Term Life Insurance or Annual Renewable Term Life Insurance.  This type of insurance removes the expiration date and also the locked in level price.  You can typically own this insurance for as long as you wish provided you continue to pay your insurance premium.  The reason this product still falls under the "Term" headline is because of the fact that often times, as a large number of years go by the cost of the insurance becomes much higher than one is willing to pay.  This products definitely has it's pro's and con's, but can definitely be utilized by individuals to purchase life insurance at lower costs than some of the longer level term policies.  This is especially true for a younger person.

 

WHOLE LIFE INSURANCE:

 

Whole life is an insurance policy that provides lifetime insurance protection instead of just simply protecting for a pre-specified length of time.  In addition to a death benefit these policies also have a "cash value" associated with them.  This cash value is money that can be used from your policy even prior to passing away.  This cash can be used without incurring fee's or penalty's to the account.

The combination of  having life insurance that lasts as long as you do and a type of insurance that creates a cash value is something that is very intriguing to some.  In addition to the aforementioned traits one of the biggest reasons individuals purchase this type of insurance is to receive the tax benefits that are given to the policyowner.  Because life insurance is seen as financially beneficial to society, significant tax benefits have been given to it – benefits that are not found with other financial instruments.

 

 

 

 

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Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products/services and advisory services offered through PAS, a registered broker/dealer and investment advisor. Financial Representative, The Guardian Life Insurance Company of America (Guardian), New York, NY.  

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