For most people who aren't in the insurance or financial services industry, trying to understand what different types of life insurance products are, and how they differ from one another, can be confusing. In this post, we'll review the similarities, and key differences, of two common types of life insurance: term life insurance and universal life insurance .
Before we examine their differences, let's spend a moment reviewing the similarities between term and universal life insurance .
First and foremost, they both offer important protection for what's most important to you. Your life insurance policy has a "face amount" death benefit. If you die while the policy is in force, the insurance company will pay that death benefit to your named beneficiary(ies). Your loved ones can then use those funds to pay off a mortgage or other debts, pay your final expenses , pay estate or death taxes, help make up for the sudden loss of income that may occur when you die, or for whatever other purpose they want to use the proceeds.
One of the most important things to understand when you're buying life insurance is the duration of coverage.
When you purchase term life insurance , you are essentially renting coverage for a pre-defined period of time. If you have a ten-year term insurance policy, that means that, as long as you continue making your premium payments, the insurance company will pay the death benefit to your named beneficiaries if you die any time within the policy term. If your death occurs after the policy term expires, however, your loved ones will not receive anything. You may have the option of renewing coverage for higher premiums at the end of your policy term.
In contrast, universal life insurance is designed to provide coverage for a longer period of time. If enough premiums are paid to keep the policy in force, the policy could last until the policy's maturity date, which could be as high as age 121 (depending on the specific company and policy.)
Term life insurance is a popular choice for young homeowners who want to make sure funds would be available to pay off a mortgage in the event of premature death, or to provide for income replacement if one spouse was to die prematurely.
As you might expect, term life insurance is cheaper than buying universal life coverage. That's because term life insurance premiums only include the cost of insurance, and the policy is only expected to be in force for a fixed period of time. The insurance company calculates the odds of the policy holder dying within the policy term when calculating premiums.
In contrast, universal life insurance is more expensive than term insurance. Instead of policy premiums simply representing the cost of insurance, universal life insurance premiums also include an amount that is credited to the policy's "cash value" account. Think of the cash value as a side fund that accumulates inside the insurance policy. When you pay premiums for universal life insurance, if the cost of insurance is less than the cash value, then the extra amount is added to the cash value. That side fund is credited with an interest rate that is usually competitive (specified in the policy.) If premiums are not enough to pay for the cost of insurance, then the cash value is there to make up the difference.
Term insurance is inflexible; if you do not pay your policy premium, the policy will terminate and coverage will end.
One popular feature of universal life insurance policies is the ability to borrow from, or withdraw from, the accumulated cash value within your insurance policy. When you take a policy loan, you are borrowing from yourself, and paying a competitive rate of interest to yourself when you make loan repayments.
Taking a partial withdrawal or a loan from cash value to cover an unexpected expense can be an attractive alternative to borrowing from a bank at higher interest rates, or using a credit card for a large purchase. Of course, using the cash value for loans and withdrawals can change how "healthy" the policy is, so to avoid surprise premium requirements in the future, it's a good practice to repay loans as soon as possible and to not treat your life insurance policy as a piggy bank.
Some term life insurance policies come with an optional feature known as "return of premium." With a traditional term life insurance policy, at the end of the policy term, the insurance coverage simply expires. The policy holder doesn't pay premiums any more, and does not receive anything from the insurance company (other than having had coverage for the term of the insurance policy.)
As with any type of life insurance, your premiums for both term life insurance and universal life insurance policies will be based in large part on your attained age and your health status when you complete an application for insurance coverage.
So, purchasing insurance while you are young and relatively healthy is a good idea, because your premiums will be lower than if you waited to buy life insurance. Of course, waiting too long could also mean that if some unanticipated health issue arises, you may not be eligible for coverage later.
You could also choose to open an investment account for your child under your state’s Uniform Transfer to Minors Act (UTMA) or Uniform Gift to Minors Act (UGMA) law. With these types of accounts, a certain amount of the gains is tax-advantaged. However, any money in the account automatically becomes the child’s money when he or she reaches the age of majority in your state (between 18-21). That means, although you may expect your child to use the money to pay for college, your child could use it for any purpose.
Whatever your insurance needs, you can count on the experienced, knowledgeable insurance professionals at Symmetry Financial Group to help protect what is most important to you.
We are different than many insurance firms and professionals who want to push their own proprietary products. We don't have our own products. Instead, we are a truly independent insurance broker, with access to insurance products from more than 30 high quality, trusted insurers - we represent many of the biggest names in the insurance industry today.
We will take the time to get to know you, and to find out what's most important to you, so we can tailor life insurance coverage to meet your specific needs, and your budget. We are never too busy to answer your questions or to explain policy features and options.
To learn more, and to start getting quotes for life insurance, contact Symmetry Financial Group today by completing our easy online contact form , or by calling (828) 457-8644.
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For most people who aren't in the insurance or financial services industry, trying to understand what different types of life insurance products are, and how they differ from one another, can be confusing. In this post, we'll review the similarities, and key differences, of two common types of life insurance: term life insurance and universal life insurance .
Before we examine their differences, let's spend a moment reviewing the similarities between term and universal life insurance .
First and foremost, they both offer important protection for what's most important to you. Your life insurance policy has a "face amount" death benefit. If you die while the policy is in force, the insurance company will pay that death benefit to your named beneficiary(ies). Your loved ones can then use those funds to pay off a mortgage or other debts, pay your final expenses , pay estate or death taxes, help make up for the sudden loss of income that may occur when you die, or for whatever other purpose they want to use the proceeds.
One of the most important things to understand when you're buying life insurance is the duration of coverage.
When you purchase term life insurance , you are essentially renting coverage for a pre-defined period of time. If you have a ten-year term insurance policy, that means that, as long as you continue making your premium payments, the insurance company will pay the death benefit to your named beneficiaries if you die any time within the policy term. If your death occurs after the policy term expires, however, your loved ones will not receive anything. You may have the option of renewing coverage for higher premiums at the end of your policy term.
In contrast, universal life insurance is designed to provide coverage for a longer period of time. If enough premiums are paid to keep the policy in force, the policy could last until the policy's maturity date, which could be as high as age 121 (depending on the specific company and policy.)
Term life insurance is a popular choice for young homeowners who want to make sure funds would be available to pay off a mortgage in the event of premature death, or to provide for income replacement if one spouse was to die prematurely.
As you might expect, term life insurance is cheaper than buying universal life coverage. That's because term life insurance premiums only include the cost of insurance, and the policy is only expected to be in force for a fixed period of time. The insurance company calculates the odds of the policy holder dying within the policy term when calculating premiums.
In contrast, universal life insurance is more expensive than term insurance. Instead of policy premiums simply representing the cost of insurance, universal life insurance premiums also include an amount that is credited to the policy's "cash value" account. Think of the cash value as a side fund that accumulates inside the insurance policy. When you pay premiums for universal life insurance, if the cost of insurance is less than the cash value, then the extra amount is added to the cash value. That side fund is credited with an interest rate that is usually competitive (specified in the policy.) If premiums are not enough to pay for the cost of insurance, then the cash value is there to make up the difference.
Term insurance is inflexible; if you do not pay your policy premium, the policy will terminate and coverage will end.
One popular feature of universal life insurance policies is the ability to borrow from, or withdraw from, the accumulated cash value within your insurance policy. When you take a policy loan, you are borrowing from yourself, and paying a competitive rate of interest to yourself when you make loan repayments.
Taking a partial withdrawal or a loan from cash value to cover an unexpected expense can be an attractive alternative to borrowing from a bank at higher interest rates, or using a credit card for a large purchase. Of course, using the cash value for loans and withdrawals can change how "healthy" the policy is, so to avoid surprise premium requirements in the future, it's a good practice to repay loans as soon as possible and to not treat your life insurance policy as a piggy bank.
Some term life insurance policies come with an optional feature known as "return of premium." With a traditional term life insurance policy, at the end of the policy term, the insurance coverage simply expires. The policy holder doesn't pay premiums any more, and does not receive anything from the insurance company (other than having had coverage for the term of the insurance policy.)
As with any type of life insurance, your premiums for both term life insurance and universal life insurance policies will be based in large part on your attained age and your health status when you complete an application for insurance coverage.
So, purchasing insurance while you are young and relatively healthy is a good idea, because your premiums will be lower than if you waited to buy life insurance. Of course, waiting too long could also mean that if some unanticipated health issue arises, you may not be eligible for coverage later.
Whatever your insurance needs, you can count on the experienced, knowledgeable insurance professionals at Symmetry Financial Group to help protect what is most important to you.
We are different than many insurance firms and professionals who want to push their own proprietary products. We don't have our own products. Instead, we are a truly independent insurance broker, with access to insurance products from more than 30 high quality, trusted insurers - we represent many of the biggest names in the insurance industry today.
We will take the time to get to know you, and to find out what's most important to you, so we can tailor life insurance coverage to meet your specific needs, and your budget. We are never too busy to answer your questions or to explain policy features and options.
To learn more, and to start getting quotes for life insurance, contact Symmetry Financial Group today by completing our easy online contact form , or by calling (828) 457-8644.
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Group Promotes 12 New
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No agent’s success, earnings, or production results should be viewed as typical, average, or expected. Not all agents achieve the same or similar results, and no particular results are guaranteed. Your level of success will be determined by several factors, including the amount of work you put in, your ability to successfully follow and implement our training and sales system and engage with our lead system, and the insurance needs of the customers in the geographic areas in which you choose to work.
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