Life Insurance Greenville SC provides a lump-sum financial payout, called a death benefit, to your beneficiaries. This payout can be used however your beneficiaries pay for funeral costs, mortgages, and day-to-day expenses.
It is important to review your beneficiaries regularly. Consider changes in family dynamics such as births, adoptions, remarriages, and divorces.
Term life insurance is simple, relatively inexpensive protection that pays a benefit to your beneficiaries when you die during the period covered by the policy.1 Its purpose is to provide your family with enough money to pay off debts, maintain their lifestyle and absorb funeral costs. It’s also often used to supplement retirement planning, as it provides a guaranteed income stream.
Generally, the premiums remain the same during the term of the policy. However, they will increase at the end of the term. For example, a 5-year renewable term policy might start out with a level premium but then increase every five years to a new rate based on your age. Some term policies offer a guaranteed minimum premium, which means your premium will not rise above a certain amount for the duration of the term.
Beneficiaries are typically family members but can be anyone you choose. It’s important to think about who will receive the death benefit when you decide on a term policy.
Often, term policies are sold for a specific length of time, such as 10, 20 or 30 years. This allows you to plan ahead and make sure you have coverage until your children are grown or other obligations like mortgages are paid off. Depending on your situation, you may also want to consider term riders.
These allow you to add additional terms or convert to a permanent policy without the need for a medical exam. Some term policies are automatically renewable, which means the insurer will renew the policy at the end of the term for a specified fee. This may be useful if you want to cover temporary needs such as an education fund or a home loan.
Another type of term policy is called credit life insurance, which covers the outstanding balance on a loan when you die. It’s typically sold by financial institutions, such as banks or finance companies that lend money for cars, furniture and other large purchases on an installment basis.
Whole Life
Whole life is a popular and risk-averse type of permanent life insurance that provides coverage for your entire lifetime. In addition to a guaranteed death benefit, it offers a savings component with cash value that accumulates tax-deferred and may be borrowed against.
With whole life, your premium and the death benefit remain fixed, so you can plan accordingly. In addition, whole life policies can be structured to build dividends that may increase your cash value beyond the amount you pay in premiums. These dividends are based on the company’s experience with investment earnings, favorable mortality and expense savings, or a combination of each. Dividends can be paid in cash, used to reduce future premium payments, or accumulated as interest. They can also be used to purchase paid-up additional insurance.
Unlike term life, whole life policies offer protection that lasts for your entire lifetime as long as you pay your premiums on time. The death benefit is paid to your beneficiaries after you die, and the policy’s cash value is typically tax-deferred until withdrawn.
Because of this, whole life policies can be a great choice for people who are looking to secure their financial needs and provide for the ones they love. Some examples include final expense insurance, which helps cover funeral and other burial costs, and supplemental health care insurance, which can help offset costly medical bills or out-of-pocket expenses.
In fact, whole life is the most popular type of permanent life insurance. According to the American Council of Life Insurers, in 2020, 59% of individual life insurance policies purchased were whole life insurance. This is because it offers a simple and straightforward way to provide a death benefit for your family with guaranteed level premiums, a set mortality rate, and the potential to earn a tax-deferred accumulation of cash value.
Variable Life
A variant on whole life insurance, variable life has an investment component and builds cash values that are subject to market risk. The policyholder chooses how to invest the cash value in separate investment accounts, which are similar to mutual funds. The cash value grows based on the performance of the investments. The company may charge a fee to manage the investments, and the individual assumes all investment risks, which can be high.
This type of policy also offers the option to borrow against the cash values or take partial withdrawals. The money withdrawn is treated as ordinary income and can be taxed. In addition, some policies have a feature that requires you to pay premiums to keep the policy in force. If you don’t, the policy will lapse and no longer provide a death benefit. Many whole life insurance policies offer a no-lapse guarantee, but this is not always available in variable universal life policies.
Some people find the flexibility of a variable life policy attractive, as they can often choose to pay premiums that are higher than their death benefits. However, the higher payments and fees can detract from investment gains. In addition, you will have to undergo full medical underwriting, and you may not qualify for coverage if your health is compromised.
The best way to determine whether a variable life insurance or variable universal life insurance (VUL) policy is right for you is to talk with a financial professional. He or she can help you understand the differences between this policy and other options, including term life insurance and whole life insurance.
When researching policies, examine the internal policy costs and look at historical performance of the investment funds that a particular company holds, Hayes-Blocksom says. You should also consider the guaranteed parts of the policy, which typically include a minimum amount that your beneficiary will receive and a return on your initial investment. In addition, look for a company that charges low premiums and has a good track record of paying out death benefits. Finally, don’t buy a policy based on non-guaranteed projections, Flagg adds.
Universal Life
Universal life insurance offers many of the same features as whole life insurance, but with more flexibility in premium payments. It can also offer the potential for higher cash value growth through a variety of crediting strategies and underlying investment options. UL policies also have the ability to increase death benefit coverage without going through further underwriting (questions about your health).
A UL policy may provide the flexibility of variable life insurance with the security of permanent protection. It allows you to adjust your premium payments based on your needs, which can be beneficial for people who are self-employed or who have income that fluctuates month to month. A UL policy will also provide the option to build up a death benefit that can be paid in a lump sum if you so choose.
There are several types of UL life insurance including guaranteed universal life, variable universal life, and indexed universal life. They vary in their performance and risk, so you should make sure to consult an experienced insurance agent before purchasing any type of UL policy.
Unlike whole life insurance, which has a fixed cost of insurance charge, universal life policies are often more expense sensitive, meaning the insurer deducts a portion of your cash value account to cover its expenses and the cost of your coverage. Because of this, UL policies can have lower death benefit guarantees than whole life insurance.
However, a UL policy typically costs less than whole life insurance, because it provides the flexibility of raising or lowering premiums within certain limits. You will need to watch the cash value account balance over time because withdrawals and policy loans can deplete it, causing your premiums to go up or the policy to lapse.
A UL policy can also be used to buy long-term care coverage, which is a growing concern for people in their retirement years. This is because long-term care costs are on the rise and are often not covered by traditional medical insurance. This rider can help offset these costs by paying a death benefit to the beneficiary of your policy in the event that you need to move into a nursing home or other assisted living facility.