A life insurance policy guarantees the life insurance provider will pay a specific sum of money to your named beneficiaries when you die, in exchange for premiums you pay to them during your lifetime.
Benefits of Life Insurance:
1. Replace income for dependents.
2. Pay for immediate expenses such as funeral and burial costs, mortgage or rent, etc.
3. Pay for ongoing expenses i.e., food, housing, utilities, etc.
4. Pay federal “death” taxes and state “death” taxes.
5. Make significant charitable contributions.
6. Pay for future expenses such as college costs or retirement.
Types of Life Insurance:
· Term Life: Insurance that covers you for a specific amount of time- typically 10, 20 or 30 years for a predetermined dollar amount. It only pays if the death occurs during the term of the policy. Term life insurance typically offers the most amount of coverage for the lowest premium.
· Whole Life / Permanent Life: Whole life, also known as permanent life insurance, covers you for your entire life, with fixed premiums, a guaranteed cash value (acts like a savings account), and a guaranteed payout amount. It accumulates cash value on a tax-deferred basis, which you can choose to borrow against. Because of these additional benefits, the initial premiums are higher than what you would pay for a term life insurance policy with the same amount of coverage. Whole life insurance only pays a death benefit when the policyholder dies.
· Universal Life: Universal life is like a whole life policy because it has a death benefit and a cash value. The difference is that universal life insurance offers adjustable premiums. The savings (cash value account) usually earns a money market rate of interest and after money has accumulated in the account, the policyholder has the option of altering premium payments- providing there is enough money in the account to cover the costs.
· Variable Life: Variable life insurance has a death benefit with a savings account, and you can decide how the cash value gets invested. There are several investment options, and you are in control of the risk of your investment which could mean the value of the policy could grow quicker unless investments do not perform well, the cash value and death benefit may decrease.
Life Insurance does not have to be scary or difficult. Contact Paroubek Insurance and get the knowledge and expertise you need about choosing life insurance from one of our trusted advisors.