What is Life Insurance?
Life insurance is a great way to protect your assets for your future benefit as well as for your family. Life insurance can also help aid in the transfer of your wealth for estate planning purposes. Insurance benefits are not taxed, provide income to your beneficiaries when you die, and can be used to pay estate taxes. Policies range from $50 per month to a single lump-sum payment (depending on the amount of insurance purchased along with the age and health of insurer).
Types of Life Insurance
Term Life Insurance
You purchase protection (the "death benefit") for a fixed dollar amount for which you pay a fixed cost every month. You are protected for the "term" of your policy, which could be up to 20 years. If you die during that time period, the death benefit is paid to your beneficiaries tax-free. Term insurance doesn't allow you to build up cash-value, so it's usually the least expensive type of insurance you can buy.
Permanent Life Insurance
Permanent insurance allows you to choose the amount of protection to buy while building up cash value that earns interest tax-deferred. There are many types of permanent insurance that guarantees you stay protected as long as you pay your insurance premiums. Some have a fixed cost for your lifetime, while others have premiums that may change. Guarantees on Life Insurance policies are based upon the claims paying ability of the Issuing Company.
Health Care Planning for Long-Term Care
Depending on your age, health condition, family situation, and financial assets, you may want to consider Long-Term Care insurance. This insurance covers many of the expenses associated with long-term care and eases the burden on your family, protects your assets, or preserves your assets for your heirs.
- Provides coverage should you become sick and need in-home or nursing home care
- Protects your assets from the high cost of long-term care
- Payable in monthly installments
- From $100 per month to a single lump-sum payment (depends on amount of insurance purchased and age and health of insurer)
Term insurance provides a level premium and a level-death benefit protection for a stated period of time, such as 10 or 20 years. Term insurance can be a good fit for younger individuals and families, who need protection against the loss of income of a primary earner for a stated period of time, at an affordable cost. It has no savings component. In most cases, a medical examination will be required. Permanent insurance typically provides both a death benefit and a savings component. There are different types of permanent insurance, including whole life, universal life, index-universal life, variable life and variable-universal life. Permanent insurance may provide protection for your entire life. If a guaranteed level premium is important to you, make sure your policy provides for one. Permanent insurance accumulates a cash value, and the policy owner may be able to borrow against it tax-free or use it for retirement or other goals (like education). Premiums are initially higher than for term coverage.
Ask yourself the following questions:
- How much of the family income do I provide?
- If I were to die, how would my survivors, especially my children, get by?
- Does anyone else depend on me financially, such as a parent, grandparent, brother or sister?
- Do I have children for whom I would like to set aside money to finish their education in the event of my death?
- How will my family pay final expenses and repay debts after my death?
- Do I have family members or organizations to whom I would like to leave money?
- Will there be estate taxes to pay after my death?
- How will inflation affect future needs?
Some insurance experts suggest that you purchase five to eight times your current income. However, it is better to go through the above questions to figure a more accurate amount.
You may have enough coverage from your employer, however, you will want to think about what will happen to that coverage if you leave your current employer. Is it portable? Will the premiums go up as you get older?
† Securities and insurance products are offered through Cetera Investment Services LLC (doing insurance business in CA as CFG STC Insurance Agency LLC), member FINRA/SIPC. Advisory services are offered through Cetera Investment Advisers LLC. Neither firm is affiliated with the financial institution where investments are offered. Advisory services are only offered by Investment Adviser Representatives. Registered address and phone number: American Savings Investment Services, 300 North Beretania Street Honolulu, HI 96817. (808) 735-1717.
Not FDIC Insured
Not Bank Guaranteed
May Lose Value
Not Insured by any Federal Government Agency
Not a Bank Deposit