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  • Mark Dierolf

Life insurance protects quality of life

Updated: Mar 26, 2022

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.

There are 3 basic types of life policies:

  • Cash Value;

  • Modified Endowment; and

  • No Surrender Value.

A 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 may supplement a Roth IRA when when savings can be borrowed tax-deferred.

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.

A Modified Endowment is a cash value life insurance policy with excessive funding. It may have tax-deferred earnings and a tax-free benefit, but loans are treated at withdrawals as taxed as such.

A life insurance policy with no surrender value has no cash-in value to the insurer. But it may still have cash value if sold to an investor.

No surrender value products include:

  • Term life: Premiums and benefits are guaranteed for a set period of time. Some policies offer an exchange for a new one without proof of good health. This is often called a "conversion" option.

  • Universal life: May offers a no-lapse guarantee for an underfunded policy to stay in force. It's an alternative when a term life policy and cost less than a Whole Life policy.

  • Temporary life. Only has the values offered in the policy. Used for short term needs of under 12 months.

Life insurance is personal property. It can last a few years or a lifetime depending on what you buy and if you take care of it.

A life insurance policy should be reviewed every 2 years. Call Mark Dierolf at (831) 753-0507 for a review.


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