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    Wednesday, February 5, 2020

    What Are The 3 Types Of Life Insurance Information From Formula News.

    What Are The 3 Types Of Life Insurance Information From Formula News.

     We're gonna talk about the three most common types of life insurance. I know that can be pretty dry but because everyone has a different situation one policy. may be more favorable over another has your situation and your finances. change evolving into other types of policies could make financial sense now in subsequent we're going to dissect the purpose. 

    Use and the advantages of using permanent or high cash value type Life insurance so stay tuned alright so here we go to start off let's look at the most common type of life insurance that would be term why is term the foremost common well for one it's the least expensive pure life insurance death benefit it can be used to protect your family to pay off debts maybe even to pay for planned future expenses it's going to not be good for a lifelong policy however now you can buy term for specific periods such as 5 10 15 20 even 30 years and the downside determines this it gets more expensive as you age it's prohibitive for estate planning as the older you get premiums can be far too expensive most people drop their term coverage about retirement time as the costs. 




    What Are The 3 Types Of Life Insurance Information From Formula News.

    What Is Basic Life Insurance.

    Are pricing them out of their policy term has no return of premium or cash value once you quit paying premiums all past premiums are lost they're gone you essentially must die to get a benefit now you never own term Life insurance it's more like renting you quit paying rent you really don't have anything to show for it so when does one want to use term Life insurance well one of the most popular reasons is when you're young and it's inexpensive and you have a young family term are often an excellent thanks to assure your family will be provided for in case of a tragedy or an end time death now only about one to two percent of all term policies ever end up paying a death benefit.

     Which is why it's relatively inexpensive the chances of a the company's favor by the time you hate your 60s and 70s term is extremely expensive and is usually dropped because of the costs or it's not available because of health issues now the next type is what's called a universal life universal life came out in about the 80s it was designed to build some cash value and help offset the cost of insurance at you age essentially the premium is made up of two parts you have the insurance part for the death benefit and then there's a savings part or a cash value part the death benefit in  is covered by guess what term insurance.

     And it's not the cheap term Life insurance you hear advertised on the radio it's actually quite expensive term insurance the difference is you can buy term in increments like you know 10 or 20 or 30 years in a or universal life the term is what's called annual renewable term it's actually less costly while you're young but it is incredibly expensive as you age the idea with the UL is that you overpaid the premium and the excess went into a cash value account and those funds received in what's called an interest credit based on the current interest rates at the ton the hope was the cash value would grow and as the cost of the term Life insurance increased the cash value could help offset those cost if there was enough cash value at some point the earnings on the cash value would or hopefully could help pay the premiums the downside was again the cost of Life insurance it had no cap to it in other words the Life insurance company could raise the term cost and for many the cash value was eaten up rather quickly and by the time people retired the cost of Life insurance had escalated the cash value couldn't keep but with the costs now when that occurs. 

    You're faced with either paying the premium out-of-pocket which is huge or the policy lapses and you lose everything many older couples could not afford the higher premiums and those policies lapsed now there are three types of  or universal life there's a fixed universal life a variable universal life and an indexed universal life a fixed is interest rate driven each year it's credited interest rate and it's adjusted based on the current economic environment as you can imagine with interest rates where they are currently this type of universal life is very unattractive as the costs are much higher than even the potential earnings the second type or the variable or the  universal life essentially let you invest it in mutual funds which were called sub accounts the two problems with a variable are the there's losses they directly impact your cash value and secondly the management fees charge for a variable policy are horrendous it's not uncommon to have three to five percent each year just in fees and this will eat up cash value and potential returns quickly if you have losses and also subtract fees and the cost of Life insurance.

     Many of these policies in a market downturn clothed to be a disaster now the final piece to a variable  is it still uses term insurance as the death benefit and again each year it's more expensive and the older you get the worse it gets couple that with market volatility and well in my opinion the are often one among the riskiest policies you can get the last type of is called an indexed universal life or an eye  this is relatively new the first ones were issued in 1997 we've yet to see a full generation go with this type of policy but the premises it's still a it's still term insurance and a cash value component the difference is how the cash value is credited the Life insurance company takes a portion of the interest it earns on its portfolio and it buys options on an index such as the sp500 the idea is that you can participate if the market goes up but if the market goes down you can't lose any money like you could in a well the reason that your money isn't actually in the market is the reason why your money doesn't go down. 

    What Are The 3 Types Of Life Insurance Information From Formula News.

    Which Is Better Term Or Whole Life Insurance.

    When the markets do you just participate via the option in an we still have the issue of term insurance and the escalating costs even in a year where the market goes down and your cash value isn't affected due to market losses you still have the cost of  Life insurance coming out and the fees and again this isn't the cheap term that you simply can just pass with an ad on TV it's very expensive term when the value of the term comes out of your premium or your cash value you still end up going backwards because the VAT cash value did not grow that year but your cost still came out the real problem with the with an is the ridiculous market return projections that many agents use you should never trust an illustration that shows more than about 4% but so many of them are still using  6,  7,  8 , 9 % those returns are fictitious and unlikely to even come close to that sort of a return now.

     The final type of insurance is called whole Life insurance it's pushing about 200 years in longevity and it even goes back further I'd say the biggest difference is you can own a whole life policy you can pay it up kind of like paint off your mortgage and then you own the policy the other difference is how the insurance is paid for with each premium you own more and more of your death benefit it's not term Life insurance in fact it's the only policy that's that really isn't term Life insurance the cost of the Life insurance is more expensive than term and its price so that you will have it your whole life it's not made for a short-term needs it's made to actually die with it no matter how old you are now most whole life policies are designed to be owned at some point in many cases that's about the time you retire this way you can quit paying premium yet you still have your policy growing and compounding the death benefit is owned and the cost of Life insurance is eliminated this makes for a very efficient lifelong policy now the downside is that it's not 
    made to be a short-term vehicle the efficiency comes. 

    The longer you own it the cash value grows by the way of the dividend now this varies between companies but the dividend can also be used for a tax-free income stream during retirement okay so that's a quick and brief overview now the cost of Life insurance in a whole life policy is basically spread out throughout your whole life it never gets any more expensive remember in any of the US because its annual renewable term  Life insurance every year the cost of  Life insurance gets higher. 

    The older you get the more gray hair you get the worse it's going to be whole life never  old and you're now 80 years old your cost of insurance doesn't change it still as if you're 25 years old so it's again designed just a lot differently and more importantly it's designed so that you can own it and owning your policy it can be huge in retirement you know one of the most efficient ways to pass on an estate is through life insurance however you've got a plan for that ten fifteen twenty years before before retirement so that you can get a again one of the most efficient ways to pass on your legacy now whole life's not made for short-term needs that's four term if you just need to cover something. 

    For the next five to sure that something gets paid for if you were to die then term is exactly what you want and again most young couples the ability to save and put away some more money then whole life can make a lot of sense in my opinion universal life is a little bit too dangerous to even mess with the reason being is that that cost of Life insurance is going to continually escalate you can never own it and chances are you could be priced out of that policy before you finally pass on okay so that's a quick fast and furious look and in any given situation add it at different times in your life one might make more sense than the other so as always if you have any.

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