{"id":2225,"date":"2021-09-07T07:37:20","date_gmt":"2021-09-07T07:37:20","guid":{"rendered":"https:\/\/469899a3-97a5-4c9b-8d86-b9629724411a.cc10.conves.io\/?p=898"},"modified":"2021-09-07T07:37:20","modified_gmt":"2021-09-07T07:37:20","slug":"life-insurance-basics","status":"publish","type":"post","link":"https:\/\/swflinsurance.com\/life-insurance-basics\/","title":{"rendered":"Life Insurance Basics"},"content":{"rendered":"

Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations:<\/p>\n

1. Replace income for dependents<\/strong><\/p>\n

If people depend on an individual\u2019s income, life insurance can replace that income if the person dies. The most common example of this is parents with young children. Insurance to replace income can be especially useful if the government- or employer sponsored benefits of the surviving spouse or domestic partner will be reduced after their companion dies.<\/p>\n

2. Pay final expenses<\/strong><\/p>\n

Life insurance can pay funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.<\/p>\n

3. Create an inheritance for heirs<\/strong><\/p>\n

Even those with no other assets to pass on, can create an inheritance by buying a life insurance policy and naming their heirs as beneficiaries.<\/p>\n

4. Pay federal \u201cdeath\u201d taxes and state \u201cdeath\u201d taxes<\/strong><\/p>\n

Life insurance benefits can pay for estate taxes so that heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the federal \u201cdeath\u201d tax rules between now and January 1, 2011 will likely lessen the impact of this tax on some people, but some states are offsetting those federal decreases with increases in their state-level estate taxes.<\/p>\n

5. Make significant charitable contributions<\/strong><\/p>\n

By making a charity the beneficiary of their life insurance policies, individuals can make a much larger contribution than if they donated the cash equivalent of the policy\u2019s premiums.<\/p>\n

6. Create a source of savings<\/strong><\/p>\n

Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner\u2019s request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of \u201cforced\u201d savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim).<\/p>\n

Types of Life Insurance<\/h3>\n

There are two major types of life insurance\u2014term and whole life.<\/p>\n

1. Term Life<\/strong><\/p>\n

Term insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions. There are two basic types of term life insurance policies\u2014level term and decreasing term. Level term means that the death benefit stays the same throughout the duration of the policy. Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy\u2019s term.<\/p>\n

2. Whole Life\/Permanent Life<\/strong><\/p>\n

Whole life or permanent insurance pays a death benefit whenever the policyholder dies. There are three major types of whole life or permanent life insurance\u2014traditional whole life, universal life, and variable universal life, and there are variations within each type.<\/p>\n

In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company keeps the premium level by charging a premium that, in the early years, is higher than what is needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.<\/p>\n

By law, when these \u201coverpayments\u201d reach a certain amount, they must be available to the policyholder as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.<\/p>\n

Universal life, also known as adjustable life, allows more flexibility than traditional whole life policies. The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in the account, the policyholder will also have the option of altering premium payments\u2014providing there is enough money in the account to cover the costs.<\/p>\n

4. Variable Life<\/strong><\/p>\n

Variable life policies combine death protection with a savings account that can be invested in stocks, bonds and money market mutual funds. The value of the policy may grow more quickly, but involves more risk. If investments do not perform well, the cash value and death benefit may decrease. Some policies, however, guarantee that the death benefit will not fall below a minimum level. Another variant, universal variable life, combines the features of variable and universal life policies. It has the investment risks and rewards characteristic of variable life insurance, coupled with the ability to adjust premiums and death benefits that is characteristic of universal life insurance.<\/p>\n

If you have any questions about life insurance or would like to open a life insurance policy, please call SWFL Insurance<\/strong> at 800-829-5270<\/a> today!<\/p>\n","protected":false},"excerpt":{"rendered":"

Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations: 1. Replace income for dependents If people depend on an individual\u2019s income, life insurance can replace that income if the person dies. The most common example of this is parents with young children. Insurance to replace income can be especially useful if the government- or employer sponsored benefits of the surviving spouse or domestic partner will be reduced after their companion dies. 2. Pay final expenses Life insurance can pay funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance. 3. Create an inheritance for heirs Even those with no other assets to pass on, can create an inheritance by buying a life insurance policy and naming their heirs as beneficiaries. 4. Pay federal \u201cdeath\u201d taxes and state \u201cdeath\u201d taxes Life insurance benefits can pay for estate taxes so that heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the federal \u201cdeath\u201d tax rules between now and January 1, 2011 will likely lessen the impact of this tax on some people, but some states are offsetting those federal decreases with increases in their state-level estate taxes. 5. Make significant charitable contributions By making a charity the beneficiary of their life insurance policies, individuals can make a much larger contribution than if they donated the cash equivalent of the policy\u2019s premiums. 6. Create a source of savings Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner\u2019s request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of \u201cforced\u201d savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim). Types of Life Insurance There are two major types of life insurance\u2014term and whole life. 1. Term Life Term insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions. There are two basic types of term life insurance policies\u2014level term and decreasing term. Level term means that the death benefit stays the same throughout the duration of the policy. Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy\u2019s term. 2. Whole Life\/Permanent Life Whole life or permanent insurance pays a death benefit whenever the policyholder dies. There are three major types of whole life or permanent life insurance\u2014traditional whole life, universal life, and variable universal life, and there are variations within each type. In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company keeps the premium level by charging a premium that, in the early years, is higher than what is needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people. By law, when these \u201coverpayments\u201d reach a certain amount, they must be available to the policyholder as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy. Universal life, also known as adjustable life, allows more flexibility than traditional whole life policies. The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in the account, the policyholder will also have the option of altering premium payments\u2014providing there is enough money in the account to cover the costs. 4. Variable Life Variable life policies combine death protection with a savings account that can be invested in stocks, bonds and money market mutual funds. The value of the policy may grow more quickly, but involves more risk. If investments do not perform well, the cash value and death benefit may decrease. Some policies, however, guarantee that the death benefit will not fall below a minimum level. Another variant, universal variable life, combines the features of variable and universal life policies. It has the investment risks and rewards characteristic of variable life insurance, coupled with the ability to adjust premiums and death benefits that is characteristic of universal life insurance. If you have any questions about life insurance or would like to open a life insurance policy, please call SWFL Insurance at 800-829-5270 today!<\/p>\n","protected":false},"author":2,"featured_media":4927,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_yoast_wpseo_title":"","_yoast_wpseo_metadesc":"Many financial experts consider life insurance to be the cornerstone of sound financial planning. 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