Project Description
LIFE INSURANCE
Life Insurance
There are a variety of Life Insurance Products. We outline them below.
Term life insurance is considered an economical form of coverage and is often used if life insurance is needed only for a limited period of time.
The policy was originally created for the entertainment industry. The proceeds indemnify the entity for the loss of revenue due to the death of a key person.
Traditional whole life insurance combines a death benefit with an accumulation element, often referred to as the policy’s cash value.
Universal life is a variation of whole life with added flexibility. This flexibility allows the policy owner to modify (within certain limits) the policy face amount or corresponding premium in response to changing needs or circumstances.
No-Lapse Guarantee Universal Life
As a result of the lack of flexibility combined with guarantees in insurance products, No-Lapse Guarantee Universal Life (NLG) was created.
OUR VALUES
Term Life Insurance
Term life insurance is considered an economical form of coverage and is often used if life insurance is needed only for a limited period of time. Here are some points to consider:
- Traditional term life insurance only provides life insurance protection and does not have a cash value component the way many kinds of permanent life insurance policies typically do.
- The periodic cost of insurance rates increase as the insured becomes older and his or her statistical chance of death increases.
- Premiums may be level for a certain period of time only based on the length of coverage. After the initial period, premiums will be increased.
- Premiums will be required at regular intervals during the entire time the life insurance policy is active to keep it in force.
- Because term life insurance does not have a cash value component, no policy loans or policy withdrawals are available to a policy owner
- The advantage of term insurance is that it is (initially) inexpensive.
- The disadvantage of term insurance is that it is often outlived and the premiums eventually become prohibitive since they increase with age.
Consider For:
Clients that need coverage for a specified and limited number of years only. The cost eventually becomes prohibitive in older ages, and for this reason, term insurance only results in paying a claim less than 2% of the time. Regardless of the initial age at which a very healthy individual might acquire term life insurance, the average lifetime cost for term insurance can be as much as 70% of the death benefit, and for those living past average life expectancy to age 100, the cost of term insurance can exceed 400% of the death benefit
Whole Life Insurance
Traditional whole life insurance combines a death benefit with an accumulation element, often referred to as the policy’s cash value. Some things about whole life insurance that you should be aware of are:
- The cash value will generally increase each year the policy stays in force. The policy’s payable death benefit is the face amount of the policy, which remains consistent so long as premiums are paid.
- The owner has no control over how the cash value portion of the policy is invested.
- The premium is usually set when the policy is issued and may be level or graduated, depending on the insurer and product.
- Premiums will be required at regular intervals during the time the life insurance policy is active to keep it in force.
- Failure to pay a premium could result in a loan (as high as 8%) against the policy.
- Loans and withdrawals will affect policy values generally including the amount of death benefit proceeds paid out to beneficiaries.*
- The main advantages of whole life are the guaranteed death benefit and guaranteed cash value if premium payments are made in a timely manner. Guarantees are based on the claims-paying ability of the issuing insurance carrier.
- The main disadvantages of whole life are the high, fixed premiums and the mortality costs being based on the 1980 CSO tables for some carriers. Additionally, at death, the cash value remains with the carrier and the leverage normally afforded to properly structured policies may be severely impacted in seasoned policies Last, the design and lack of transparency create a “black box” scenario.
Consider For:
Conservative clients wanting fixed, predictable premiums and guaranteed benefits with higher cash value potential.
*Loans and withdrawals reduce the policy’s cash value and death benefit and increase the chance that the policy may lapse. If the policy lapses, is surrendered or becomes a modified endowment contract, the loan balance at such time would generally be viewed as distributed and taxable under the general rules for distributions of policy cash values. Pre-age 59 ½ penalty tax provisions apply to contracts classified as. Modified endowment contracts (MEC’s). Withdrawals from MEC’s, prior to age 59 ½ may be subject to a 10% federal income tax penalty
Universal Life Insurance
Universal life is a variation of whole life with added flexibility. This flexibility allows the policy owner to modify (within certain limits) the policy face amount or corresponding premium in response to changing needs or circumstances. Here are some key points you should understand about universal life insurance:
- The owner has no control over how the cash value portion of the policy is invested. A minimum rate of return is specified in the policy.
- The policy’s face amount can increase or decrease according to the owner’s payments into the policy.
- Although a premium schedule will be established at issue to correspond to the owner’s life insurance needs and goals, current premium payments may or may not be necessary to keep the policy in force.
- The owner may be able to take policy loans and withdrawals, which will affect the amount of policy values generally including the amount of death benefit proceeds paid out to beneficiaries.
- The main advantages of universal life are the flexibility of premiums, and updated mortality costs, thus resulting in typically a lower premium outlay than a whole life product. Universal life policies, if structured properly, can generally produce much higher internal rates of return on the death benefit than whole life insurance.
- The main disadvantages of typical universal life products are the non-guaranteed element If lower than expected interest is credited, higher premiums may be required in order to keep the policy.
Consider For:
Clients that need permanent insurance but want flexibility as well as competitive cash value potential. The clients and the advisors need to pay attention to the non-guaranteed elements and properly monitor the policies in the future to make sure they stay on track.
No-Lapse Guarantee Universal Life
As a result of the lack of flexibility combined with guarantees in insurance products,No-Lapse Guarantee Universal Life (NLG) was created. This product has similar features as a typical universal life product, but offers the following guarantees:
- Premiums
- Death benefit
- Mortality
- Interest rate
No other product has all of these features and allows the premiums to be customized in length. The premiums paid for these policies ensure that the policy expenses are covered during the insured’s lifetime.
This product is often the most appropriate product to use for estate planning and transferring wealth where cash value is usually not as important as providing low cost death benefit for life. For policies that are owned inside a life insurance trust, the general goal is to pay the least amount of money for the maximum death benefit. Further, to be able to contractually guarantee the policy from not lapsing may be of utmost importance.
- It is important to note that the timing of premium payments with these policies is very important. If payments are not made on time, this can jeopardize the guarantee and/or length of the guarantee.
- The main advantage of NLG policies is having the flexibility and guaranteed elements in one product.
- The main disadvantage of contractually guaranteed universal life is the required timing of premium payments and the fact that the cash value is not significant and maybe even non-existent in some cases (depending on the carrier). This lack of cash value can limit the client’s options to make future changes in coverage.
Consider For:
Clients concerned with providing liquidity at death and optimizing the death benefit relative to premiums paid, and for whom cash accrual, and access to cash value is not important. Best suited for many wealth transfer plans where the need for a substantial lifetime cash value is of little or no importance.
Contract Protection Life Insurance
The policy was originally created for the entertainment industry. The proceeds indemnify the entity for the loss of revenue due to the death of a key person.
The insured does not have knowledge that the coverage is applied for or that it has been placed in force.
Providing there is a contract/agreement in effect between the insured and policyowner confirming insurable interest, coverage can be issued the same day the single page application is submitted along with the initial annual premium.
Overview of Benefits:
- NO medical exam required
- Coverage – accident and sickness
- Term of Insurance – 1 or 2 years (may be renewed)
Consider For:
Our Provider will offer Guarantee Issue yearly renewable Term life insurance coverage for the following contingencies:
- Buy and Sell Agreements
- Keyman coverage
- Business and Personal Loans
- Divorce Agreements