18 C
Los Angeles
Saturday, October 31, 2020

What Is Permanent Life Insurance And When Does It Fit Your Needs?

Must read

New Tax Legislation – Benefit Summary

Congress recently passed the Tax Cuts and Jobs Act changing the tax code beginning 2018. This new tax law made significant changes to the...

Tax Aspects of Working at Home

How much of their home office expenses can be deducted is one of the most misjudged tax questions faced by home workers. The reality...

Taking the Mystery Out of Capital Gains

The profit you make on the sale of stock is known as a capital gain. If you have owned the stock for a year...

Taxation on the Sale of a Home

For most of us, our home represents our largest asset. Over time, the management of this asset can make a big difference in our...

Once you have determined that you need life insurance and calculated how much coverage you require, you will have to choose between several types of life insurance. There are two very different types of life insurance contracts — term and permanent.

Permanent Life Insurance Overview

As the name implies, permanent (cash value) insurance is best suited for the individual with a long term (often indefinite) need. A permanent policy is really a combination of “pure insurance” and an investment element. Premiums are considerably higher than term rates in the beginning years, but may drop significantly, or even disappear, in later years. Other differences may include an increasing death benefit, a “cash value” associated with the policy, and tax-advantaged borrowing privileges against your cash value.

There are two unique types of permanent insurance. Each has it’s own benefits and disadvantages which must be weighed carefully.

Whole Life Insurance

This type of coverage covers you for as long as you live. Usually, this type of policy has a level premium for the life of the policy. Initial premiums are high, compared with term insurance premiums, but eventually they become lower than the premiums you would pay if you had kept renewing a term policy.

Universal Life Insurance

With Universal Life coverage, which also covers you for as long as you live, you can vary your premium payments and the face amount of your coverage. Most of your premium payment goes into an account, which earns interest. You may borrow against the cash value, but eventually, if the balance continues to drop, your coverage will end. To prevent that, you would have to start making premium payments again, increase your premium payments, or lower your death benefits. Generally, your policy will state that it will pay the premiums from the cash value of your policy.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice.

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest article

New Tax Legislation – Benefit Summary

Congress recently passed the Tax Cuts and Jobs Act changing the tax code beginning 2018. This new tax law made significant changes to the...

Tax Aspects of Working at Home

How much of their home office expenses can be deducted is one of the most misjudged tax questions faced by home workers. The reality...

Taking the Mystery Out of Capital Gains

The profit you make on the sale of stock is known as a capital gain. If you have owned the stock for a year...

Taxation on the Sale of a Home

For most of us, our home represents our largest asset. Over time, the management of this asset can make a big difference in our...

Managing Your Assets

When you start organizing your portfolio you will want to consider how you will be spending your money after you retire. Some money will...