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Securing Your Family’s Future with Life Insurance
Benefits Associated With Different Types of Life Insurance
September 3, 2009 — To help build your financial security, a life insurance policy is needed to help protect your loved ones in the event of your death. Life insurance can come in many forms, but all has one main benefit; the amount of your policy will be paid to your beneficiary directly upon your death and will be income tax free.
Life insurance can also offer the added benefits of building yourself a tax-advantaged income for your retirement or to help give you assets to counteract estate taxes. The thought of looking into life insurance can seem and unpleasant and confusing task. In truth, it is a lot simpler than you might think.
There are main factors that you need to think of when trying to understand life insurance and what might be the right decision for you. These are your age, your total number of dependents, and what your financial goals are for the future.
There are basically two categories of life insurance. The first is Term Insurance and the second is Cash Value Insurance. Let us look at each one individually to shed a bit more light.
Term Life Insurance
This type of insurance helps protect you for a specific period of time. If you should die during that time period, a death benefit is then paid to the beneficiary of the policy. This is usually less expensive than Cash Value Insurance. When thinking about Term Life Insurance, you can link it to how you think of renting a property. You pay for it during your lease term and then at the end of the term, it will expire. This is the same with Term Life Insurance.
Cash Value Insurance
This type of insurance helps to protect your for your life-time and also builds a cash value. This cash value can be utilized for emergencies and other needs. Cash Value Insurance gives a payment that is income tax free upon your death.
There are four main types of Cash Value Insurance.
1. Variable Universal Life: This is created for those who have a longer time to invest in their insurance. Variable investment options are similar in kind to mutual funds and can fluctuate with the market value. This type of insurance is best for younger couples with a high risk threshold.
2. Variable Second To Die: This is created for helping in estate planning, as in the passing of a family business or other asset from one generation to the other. This type of insurance covers two individuals and will not pay until the second individual’s death.
3. Whole Life: This type of considered a less flexible option, but more secure than the others. It pays a guaranteed benefit upon death and cash values are also guaranteed.
4. Universal Life: This type is the most flexible options but has a secured, fixed rate of return for the policy holder. This is a good option for those who do not have a high risk threshold.




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