When it comes to estate planning, life insurance is a major component that Sam Gakhar is familiar with. A life insurance policy ensures the next generation has the necessary funds to cover any expenses should a death arise in the family.
There are a few different forms of life insurance that are available.
There are several different reasons you would want life insurance included with your estate. Giving your family the assurance that their financial worries won’t be a problem is the main one.
Life insurance can also provide income after retirement. It helps settle estate taxes and any outstanding debt that a person may have upon passing away.
There are two separate forms of life insurance available depending on your needs; both permanent and term life insurance.
Universal life insurance keeps a person covered as long as they continue to pay premiums over the course of the coverage. It is a permanent coverage.
This form of life insurance has a cash value savings component with protection as long as you live. After a death, the policy is distributed amongst the beneficiaries.
The cash value of a universal life insurance policy earns interest over time. You can also withdraw money at any time from the policy’s cash value.
A universal life insurance policy gains interest over time. The amount of interest is usually at par with standard money market rates.
Premiums are not set in stone, and can change if you need them to. You can also change the death benefit at any time in the policy.
The payment you make to your insurance policy is split into two sections. One goes towards your death benefit, and one portion goes towards the cash value of the policy.
By making these payments you give yourself the option of being able to withdraw money from the insurance policy should the need come up. This can change the terms of your policy and every company that you deal with will be different in their terms and conditions.
There is some wiggle room as far as making payments goes. If the cash value of the policy can cover your payments then you can consider this an option if you are facing a hard financial situation. Just ensure that your policy doesn’t end by using up all of the cash value.
Also, the ability to change the death benefit on your policy is an attractive feature to some people. You can increase or decrease coverage at any time that you have the policy. Just expect the premiums to change accordingly.
Whole life insurance is the same as universal life insurance in that it guarantees life insurance during the course of your life as long as premiums are paid.
Whole life insurance is also a permanent policy. It also includes a savings account which is called the cash value.
One of the benefits of whole life insurance include steady premiums. The premium of your policy is guaranteed not to change over the course of time. You can also take out a loan or withdraw funds if the money is available in the policy.
People like the option of whole life insurance because it provides stability and predictability. Your premiums and the amount of your death benefit doesn’t change over the course of time.
Building value with your whole life insurance policy
As we stated, the option to withdraw funds in case you need them or if there is an emergency is a convenient option of a whole life insurance policy.
The premium you pay every month helps build this account up into its own savings account. How much you can withdraw depends on how long you have been paying your premiums and if you wish to effect a change on your death benefit payout.
Term life insurance coverage offers insurance for a specified amount of time, usually one to thirty years. There is also a death benefit so that loved ones can pay for any expenses incurred by the deceased.
Term life insurance is different in that the policy can stop over a certain period of time. If a person passes away after the term life insurance policy has expired, no death benefit can be paid.
Premiums paid are non-refundable, so if your policy expires, you either stop paying and lose coverage and get nothing in return, or continue to pay and receive coverage.
Up to a certain age you may qualify to have your life insurance policy extended provided you meet certain conditions. This is called a renewable form of insurance. This option is available by talking to your insurance company.
The other form of term life insurance is convertible. This conversion is the changing of the policy to a permanent one and usually requires certain conditions be met as well in order to successfully switch.
When renewing or converting your term life insurance policy, it is likely that your premiums are going to change. Since you have gotten older, the insurance policy is most likely going to be more expensive every month.
Renewing or converting your life insurance policy is always recommended by insurance companies. This is always the best option, rather than letting your insurance policy expire or lapse and leave your family in uncertain times if something happens to you.
As you can see, there are some different options when it comes to life insurance policies. We chose the three most common available on the market that are also the most popular for a reason.
These life insurance policies all come with different stipulations on details such as if you can withdraw money from them and if the death benefit changes over time.
Based on the type of insurance policy you chose, you may have a changing premium or a steady one.
Just know that your life insurance policy will ensure that your loved ones are taken care of if something happens. Contact Sim Gakhar with any questions or concerns.
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