Life insurance guarantees the money
Updated: 3 days ago
Life insurance is used to protect assets, income, and to make up for lost retirement benefits. It guarantees the money if you don't survive, and may have cash value when you reach age 65.
Life insurance is your property, and the benefits may be tax-free.
You pay for the cost of insurance and the rights to the property. Like any property, life insurance can last a few years or a lifetime.
Lifetime coverage has the best value. Do you want something that breaks down in a few years, or will last a lifetime?
There are 3 basic types of life policies used for retirement planning:
Traditional Cash Value;
Modified Endowment; and
No Cash Value.
Traditional Cash Value
Cash value life insurance is the way to go if you want to use savings before age 60 or need coverage for a lifetime.
It can supplement a Roth IRA when earnings and loans are not taxed.
This policy can be used at any age as a tool for financial security, but it's best to start it before the insured is age 30.
Cash value products include:
Whole Life. Guarantees premium and benefit until maturity, usually after the insured reaches their 90s. Coverage ends at maturity and the cash surrender value is paid on the policy. Best choice for lifetime coverage but it is not flexible and is a lifetime commitment.
Universal Life. Offers coverage until maturity. Premiums, benefits and term of coverage are flexible. Could offer coverage for a specific term or for a lifetime.
Cash value life insurance with excessive funding is called a "modified endowment." It may have tax-deferred earnings and a tax-free benefit, but withdrawals, including loans, may be taxed.
These policies can supplement a traditional IRA and withdrawals are taxed the same way.
No Cash Value
Life insurance with no cash surrender value may still have cash value when sold on the life settlement market.
It's important to pay premiums when due because there's no cash surrender value to secure payment when past due.
No cash value products include:
Term life insurance guarantees the premium and benefit for a set period, the term, and may be converted into a policy that guarantees the benefit longer without proof of good heath. Conversion rights vary.
Universal life insurance with a no lapse guarantee allows an underfunded policy to stay in force with guaranteed premiums. It's an alternative when a term life policy is not available.
Temporary life insurance and a Failure to Survive benefit are not considered property and only have the values offered in the policy.
When life insurance is property, it needs maintenance like your car or your home because it can lose value without regular service.
Reach out for help finding coverage or for service of an existing policy.
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