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This is pure insurance protection. It doesn't have any cash equity. It's designed to last for a certain period of time. Essentially there are two types of plans- level premium plans where the premium stays level for either 5, 10, 15, or 20 yrs. & annually increasing premium policies ( also called Annual Renewable Term or ART ). The ART policies are typically cheaper for the first two years but then become more costly than a level premium policy. The level premium policies are very cost effective for their initial guarantee period but then become prohibitive in cost thereafter. The level premium plans have seen a major price war in the last 18 months.
PERMANENT LIFE INSURANCE This is coverage that's designed to last for a longer period of time than a term policy. It can be the policy that you'll keep for the rest of your life. Since it has a cash equity account and the funds grow tax deferred in the policy it can be used as a retirement supplement. If you're not sure how long you'll need life insurance then it's a guarantee that you'll always have coverage or that after 15, 20 or 25 years you can get your premium $$ back if you find that you don't need it anymore. If you're a business purchasing life insurance for Key Person needs then the cash equity can help a future stock buy back.
This covers two lives-usually a husband and wife- and is designed to provide
funds for future estate taxes. (See
Estate Planning section.)
If a married couple has an estate of at least $1,200,000 (or project that
their estate will be that size by the time both are deceased) then Federal
Estate Taxes can exceed 55% of the gross value of the estate. The Estate
taxes are due and payable in 9 months. This type of coverage is not that
expensive and can cover that future tax liability so that the estate can
be passed in its entirety to the heirs.
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