How life Insurance provides financial security

The primary purpose of life insurance is to provide financial capital for various family or business needs upon the death of the insured.

Capital creation to provide financial protection

• Life insurance is a type of coverage that pays benefits to designated beneficiaries upon the death of the insured person.
  • In some cases, there may be a maturity date, where the insured, if still living, can receive the proceeds.
• A small premium gives you immediate coverage, providing for a large death benefit payable upon the death of the insured, to provide capital to provide an income for dependents of a family or in business ownership or succession solutions.
• Tax deferral may be permitted with certain types of life insurance, allowing for the combination of insurance and investment components, which can facilitate the tax-free inheritance of increased funds. This estate planning tool is used by tax specialists who maximize the estate value while using life insurance.
• Life insurance may be divided into two classes: Term and Permanent.

Term Life Insurance

• Term Life Insurance is less expensive, offering coverage for only temporary periods, such as 1, 5, 10, 15, or 20 years. Longer periods can run as long as age 65, 75.
• A lifetime level term can run to age 100, and some of these plans can be paid up over a period such as 15 or 20 years. The premium remains constant for the term.
  • The cost of insurance for a certain level of death benefit is the essence of this plan, generally with less emphasis on a cash value.
  • However, some term-to-age-100 plans offer cash-out options, and some can be paid up quickly.
  • Additionally, some Term-to-100 plans may provide a death benefit, which pays out a calculated internal rate of return on policy fees when viewed as an investment. This can be assessed using a spreadsheet analysis.
• You can purchase additional term coverage for a lower premium, which does increase with each term period renewal (for example, a five-year term increases in cost in the 6th and 11th year, and so on).
• Term insurance can usually be converted to Permanent Life Insurance coverage without medical underwriting, but check with your advisor about renewal and conversion options when you plan to buy a policy.

Permanent Life Insurance

• Permanent Life insurance continues protective coverage right up to the decease of the insured or alternatively pays a level or an increasing lump sum at a certain age of maturity (usually age 100).
• It may offer cash value, tax-deferral, or premium pre-payment incentives. When cash values are associated with a Permanent plan, the amount of risk is reduced for the insurer.
  • This may also allow the internal cost of the insurance to be lowered as the increasing cash funds accumulating in the plan can reduce the level of insurance needed.
  • If the life insurance is Term to age 100 with an investment factor, the investment may eventually pay the premiums, plus increase the death benefit, depending on the insurer’s policy design.
• Permanent Life Insurance plans include:
  • Whole Life: Offers a level premium and a cash value table in the policy guaranteed by the insurer.
  • Limited Premium Payment: The policy can be paid up fully within a specific period (such as over 10 or 20 years) or paid up at age 65.
  • Endowment Life: The cash value grows to a level equal to the face value of the insurance coverage.
  • Universal Life: A hybrid mixture of life insurance and investment.

Note: Talk to your insurance specialist, as legislation may have changed.

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