The Importance of Life Insurance
No one likes buying or paying for life insurance (AKA: the "I" word).
Unfortunately, life insurance is often a necessary element of one's aggregate financial plan. Insurance can provide many benefits including lost income coverage, debt and tax liability mitigation, liquidity provision, and an efficient means of accumulating and transferring wealth to the next generation. Life insurance can be a very powerful wealth management tool.
It is imperative that a formal insurance analysis is done for every client as part of a broader wealth management plan. This usually includes a needs analysis, a review of current coverage and objectives, and an overview of the options available.
There are three primary types of life insurance that our team offers: term, whole life, and universal life.
Term Life Insurance
Term life insurance is the most basic and lowest cost insurance coverage available. It is "pure" insurance with no associated investment or dividend component.
The term insurance policy holder pays a fixed premium, for a fixed period (usually 5, 10, or 20 years), for a pre-determined level of coverage. This coverage is usually relatively inexpensive when the insured person is young but becomes increasingly costly as new policies are required later in life.
Sometimes, term insurance is the most appropriate tool available. In other instances, Participating Whole Life or Universal Life insurance is a better option.
Permanent Insurance: Whole Life (WL)
Whole life insurance is a more complex insurance option than term and is one of two permanent insurance options available. It consists of a life insurance component and a cash value component that is credited dividends from a participating fund managed by the insurer. The premiums are set for a pre-determined period (usually 10 or 20 years), but the insurance coverage is for life. The cash value and credited policy dividends grow tax deferred within the plan.
Usually, WL is appropriate for clients that don't require control of the investment component of the insurance, who are seeking stable investment returns, and who have consistent long term cash flows.
Permanent Insurance: Universal Life (UL)
Universal life insurance is similar to whole life but carries more flexibility within the investment component of the policy. This is because, unlike WL, the investment component is managed directly by the policy holder.
Usually, UL is appropriate for clients that require more control over the investment component of the insurance, who are comfortable taking on more risk, and who require more flexibility than a whole life policy affords them.
We’re here to Help:
If you are in need of proper life insurance analysis as part of a broader wealth plan, we’d love to speak with you. Please feel free to contact our team (contacts below) to arrange a complimentary, no commitment consultation. Please refer to the "Whole Life vs. Universal Life" overview attached below.