Protect your future with estate planning

Life insurance can be a valuable tool for protecting your loved ones financially.

The purpose of your life insurance policy will determine which type of policy you choose. Although some people view life insurance as merely a “bet” on when you will die, it has far more important purposes. These include:

Protection: Life insurance can protect your family and other dependents by replacing your salary if you die.

Liquidity for Taxes: Life insurance can help make sure that your estate has enough cash to pay estate taxes and other estate expenses.

Investment Tool: Life insurance can also be used as an investment tool that allows you to defer payment of the taxes owed on your gains.

Types of Life Insurance:

Life insurance policies fall into two general categories: term life insurance and permanent life insurance (also known as “cash value” life insurance.) Term life insurance is usually used only for a short period of time and consists of insurance on your life for a specified term, usually a period of one to five years. Term insurance is generally considered “pure” insurance because it is not an investment vehicle and only provides protection in the event of death. Permanent or “cash value” life insurance premiums are generally higher than for term insurance. The part of the premium that is not used to cover the cost of insurance is invested by the insurance company; this creates a cash value that the policy holder can borrow against by taking a policy loan.

The insurance industry has developed many types of life insurance. Some of the more common types of life insurance include:

Term Life Insurance: Term life insurance is usually used only for a short period of time and consists of pure insurance on your life for a specified term. If you die during the stated term, your beneficiaries collect the face value death benefits.

Whole Life Insurance: Whole Life Insurance is a type of permanent life insurance that covers you for as long as you live and continue paying our premiums. Whole life insurance provides pure insurance on your life as well as an investment vehicle to accumulate cash value.

Variable Life Insurance: Variable life insurance is permanent life insurance where the amounts of cash value and death benefits are variable and depend on the success of the investments made.

Universal Life Insurance: Universal insurance is permanent life insurance that includes both pure insurance and investment components, similar to whole life insurance. However, universal life insurance allows the owner to adjust either the amount of premiums to be paid or the amount of the death benefits to be paid at death.

Universal Variable Life Insurance: Universal variable life insurance is permanent life insurance that includes both pure insurance and investment components. It combines features of variable and universal life insurance and allows some flexibility in choosing investments.

In addition to understanding the type of policy, here are some other important questions you should get answered before signing on the dotted line:

Do your insurance premiums increase? Make sure that the language is clear regarding if and when your payments will increase.

What happens to your policy if your health declines?

What happens if you miss a payment or make a late payment? Is there a grace period? The danger is that your policy will lapse and your beneficiaries will be entitled to no money at all.

To get a sense of what a life insurance policy may include, here is a sample life insurance policy. If you have questions about your coverage, or need to get covered, Oakland Prime can offer you a free life insurance review. Just submit your information at our Life Insurance Center and one of our Advisors will contact you. 

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