Life Insurance Basics: What You Need To Know

by

Joe Maas

Life insurance is a unique instrument, excellent for protecting your assets from taxes and other predatory influences. It can provide so much more than a death benefit. It is a flexible tool that can be used in a number of creative ways to protect your money from taxes and help you reach your financial goals.

However, with any powerful tool comes responsibility. The problem with life insurance is that it is usually prescribed incorrectly, and can be completely misapplied. Life insurance is not always the best choice for reaching your financial goals, but it has remarkable value when used correctly.

It may be helpful to think about your life insurance planning from a portfolio perspective, just as you would think about your investment planning. Your investment portfolio probably contains a variety of stocks and bonds. Similarly, you may be well served by having a diversified insurance portfolio that provides you with the right tools for your unique circumstances. Remember insurance can play many roles and does not need to be a one-policy-fits-all solution. As always, seek the advice of a financial professional before making important decisions involving life insurance.

There are two primary types of life insurance. The first type of life insurance policy is called term insurance, which has no savings element. A term life policy covers an insured for a set period of time such as 10, 15, 20 or 30 years. If he or she dies while the policy is in force, the insured\’s beneficiaries receive a tax free death benefit. Essentially, a term policy provides life insurance protection and offers no other benefits. It is useful when

The other type of life insurance is permanent life insurance, also called whole life insurance, which lasts for a person\’s entire lifetime. Permanent life insurance, which accrues cash value over time, comes in a variety of different types, including traditional whole life, universal life and variable life.

Of the two types of life insurance, term life is less expensive because the insured is only paying for life insurance coverage. Permanent insurance, on the other hand, accumulates cash value over time, so the policy premiums are more expensive.

Policy provisions, features and benefits, and the general competitive advantage of policies can vary greatly among insurance companies. At the individual state level, even the rules and regulations can vary, so it is important to understand what you are buying and what provisions and limitations are included in your policy. We recommend that you work with an experienced insurance agent or financial planner to determine what type of policy you need and how it can best work for you.

Copyright (c) 2014 Joe Maas

Life insurance is an important part of an individual\’s long-term financial plan. To learn more about how it fits into your portfolio, contact the financial planning and investment experts at Synergetic Finance in Seattle. Learn more at Synergetic Finance\’s

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