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Life Insurance

The Guidance You Need to Find Suitable Life Insurance Coverage  

Life insurance can be a valuable asset in your overall financial strategy, offering much more than just death benefit protection. With the ever-changing economic landscape, the limitations of many traditional investments like IRAs and 401Ks, and the potential impact of current and future income taxes on your overall retirement strategy, you may be left wondering what tax-efficient options are available to you. Life insurance can be a supplemental solution to help address these potential financial concerns with tax-deferred accumulation and its distribution and transfer capabilities. What makes life insurance so unique is the IRS tax code which has allowed cash values and death benefit proceeds to receive tax advantages. 

What other financial asset can offer all of these tax advantages?

  • Tax-Free Death Benefit
  • Tax-Deferred Accumulation
  • Tax-Free Distributions
  • Tax-Free Accelerated Death Benefits

We are licensed to customize life insurance policies for clients in Pennsylvania, New Jersey, Delaware, Maryland, and Florida.

A young family smiling for a group photo in front of their home on a sunny day

Permanent Life Insurance vs. Term Life Insurance 

Permanent life insurance allows your cash value to grow on a tax-deferred basis while simultaneously providing lifelong coverage. You may borrow against the cash value in your permanent policy at any age and usually at a low interest rate. You have the option of repaying or not repaying the loan. If you decide not to pay back the loan, the cash surrender value along with the death benefit will be reduced by the loan amount and interest owed. 

If an unforeseen circumstance — such as a loss of employment — were to occur, you could elect not to pay premiums for a period of time and have it taken out of your cash value (assuming there is enough cash value in the policy). Permanent insurance will stay in force as long as the required premiums are paid.  

On the other hand, term life insurance policies offer you protection for an agreed-upon period of time, usually up to 30 years. While term insurance can be cheaper to purchase earlier in life, premiums to continue the policy after expiration (if this option is available) could become very expensive due to age and health. Term life insurance is a great product for someone who is on a tight budget and/or someone who needs protection for a specified period of time. Unlike permanent life insurance, there is no cash value accumulation, nor any other benefit other than the death benefit if the policyholder passes during the “term” of the contract.  

Why Invest in a Whole Life Insurance Policy?

Whole life insurance adds certainty to your financial future by balancing out some of life’s unpredictability with guarantees and flexibility. In exchange for your premium payments, your policy provides a lifetime of protection and value that can help you protect the things that matter most to you in life. Similar to equity in your home, whole life insurance builds equity over time, known as cash value. The guaranteed growth helps provide certainty as you plan for the future knowing you’ll have access to your cash value if and when you need it. 

Life Insurance companies even offer dividend-paying policies, also known as participating whole life insurance. A company that issues a participating whole life policy pays out profits it earns to its policy owners in the form of dividends. Some companies have paid dividends every year for over 100 years. Whole life can help you prepare for important financial needs during your lifetime. Some may be planned, like supplementing your retirement income or funding education for your children or grandchildren. Other unplanned needs could also be accommodated with the help of life insurance, like offsetting the financial costs of a chronic illness or covering an emergency expense.

Why Invest in a Universal Life Insurance Policy?

Universal life insurance is permanent insurance which is flexible protection that lasts for the life of the policyholder. With universal life insurance, your premiums and benefits have flexibility. If you need to make changes to your life insurance policy down the road, you may be able to increase (assuming evidence of good health) or decrease the amount of coverage. Universal life policies can provide cash value accumulation on a tax-deferred basis. You can also have access to the cash value through policy loans or withdrawals. 

The potential growth that a universal life policy can have will vary based on the specifics of your individual policy, along with other factors. When purchasing a universal life policy, the issuing insurance company establishes a minimum interest crediting rate which is outlined in your contract. However, if the insurer’s portfolio earns more than the minimum interest rate, the company may credit the additional interest to your policy. This is why universal life policies have the potential to earn more than a whole life policy some years, while earning less in other years.

Why Is Indexed Universal Life (IUL) Insurance a Good Investment? 

Indexed universal life insurance is a type of permanent life insurance that provides a death benefit as well as a potential for cash accumulation. Here is how indexed life insurance works: the cash value grows in an IUL by mirroring an index such as the S&P 500, without directly investing in the stock market.

Indexed universal life insurance is quite appealing to so many because there are minimum and maximum interest crediting limits which act as guardrails. This means that there is a ceiling on the maximum that you can earn if the index performs very well. That being said, there is also a minimum that works to protect you from losses in the event that the index does poorly. There is more potential to build a greater cash value in an IUL policy than a fixed universal life policy. IUL typically has flexible premiums, that enable you to modify your payments, or choose a fixed, consistent amount. It is imperative to pay enough premium so that the policy does not lapse. 

What Is Term Life Insurance? 

Term insurance provides you with protection for an agreed-upon period of time and will pay a benefit only if you pass away during the specified “term.” The time frames for term insurance generally range between one and thirty years. One major benefit of Term Life Insurance is cost. Many will select a term policy because it is lower in cost, compared to permanent life insurance. It is cheaper because you are paying primarily for death benefit, while with most permanent policies, your premiums would aid not only in funding death benefit, but can also accumulate cash value.

Term life insurance is often a great choice for young families that are building, especially those with many expenses who are on a budget. It allows you to purchase high levels of coverage when the need to protect your family is often the greatest. Term insurance is beneficial for protecting needs that will disappear over time. 

What happens if your term policy is coming to an end and you realize that you still need life insurance? Fear not! The good news is that many companies will give you a chance to renew your policy once the term is coming to an end. The bad news is that you will incur a substantially higher cost due to being older in age. In the event that your existing life insurance policy cannot be renewed, health status will be factored into determining your premiums and you could also be declined for new coverage. 

Key Person Life Insurance 

Your employees are what make your enterprise successful; they are the backbone that helps your company to thrive. It is very likely that you can identify some employees that are “key” to the continued success of your business. These might be individuals who possess experience, a particular skill set, or even help oversee day to day operations and make important decisions for the business. If something were to happen to those “key” employees without warning, it might upset production, revenue, or even morale within your company. Key person insurance (formerly referred to as key man life insurance) helps you to mitigate this risk precisely. 

What exactly is key person life insurance? A key person life insurance policy will protect any losses that you may incur if a key person within your business were to pass away suddenly. 

The policy’s death benefit will provide capital to help your business deal with the absence of that key person. Other sources of capital exist, such as loans, company earnings, or sinking funds, but with life insurance, you are provided with liquidity exactly when you need it: upon the death of a key person. 

Disability riders are also available and can waive premium payments in the event of the insured’s total inability to work due to disability. It works like this: you, the business owner, work with the underwriting department to establish what policy amount is ideal for your company’s needs. You pay the policy premiums and are the owner and beneficiary of the policy. This gives your business access to cash values, via loans, during the key person’s lifetime. If and when the key person passes away, the life insurance proceeds, minus any loan amounts, are paid to the business and can be used to offset losses incurred by death of the key person. If and when the key person retires, the business makes a decision whether to transfer the policy as a bonus to the key person, sell it, surrender the policy, or keep it in effect.

Service Areas

We are licensed in the following states:

    • Pennsylvania
    • New Jersey
    • Delaware
    • Maryland
    • Florida

 

For more information regarding life insurance, disability insurance, or long term care insurance, reach out to me today to review your options and decide which may be best for you.

Additional Resources

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