Life Insurance Plans for Individuals
Life insurance is a type of coverage that pays benefits upon a person’s death to designated beneficiaries. A small premium gives you immediate coverage and provides for a significant death benefit payable upon the insured’s death to provide capitalization to pay an income for dependents. In some cases, there may be a maturity date where the insured, if still living, can receive the proceeds.
Tax deferral is allowed with some types of life insurance to offer insurance with an investment component, allowing increased funds to pass to heirs. Tax specialists can maximize an estate’s value while using life insurance. And the investment after achieving growth can enhance retirement income.
Types of Life Insurance
Life insurance has two primary classes:
1. Term Life Insurance Term Life is less expensive, but most term periods are generally temporary. Many people choose term life insurance (or term rider on a permanent plan) when beginning a family, as they try to keep costs lower while covering many liabilities.
Term Life Insurance plans include:
The death benefit coverage continues for temporary terms set in 5, 10, or 20 years; or a lifetime level term to age 100.
- Other periods can run to age 65, 75.
- The premium remains constant for these terms.
- The low cost of insurance for a certain level of death benefit is the essence of this plan, generally with less emphasis on a cash value.
- You can buy more term coverage for less premium, which does increase upon each term period renewal (for example, a five-year term rises in cost in the sixth and eleventh year and so on).
- Term insurance can generally be converted to Permanent Life Insurance coverage without medical underwriting, but check with your advisor about renewal and conversion options when you plan to buy a policy.
2. Permanent Life insurance The coverage continues to the time of the decease of the insured or pay one a level or an increasing lump sum at a certain age of maturity (usually age 100), or offers cash value or premium pre-payment incentives. Where there are cash values associated with a Permanent plan, the insurance cost can be lowered as the increasing cash funds accumulating in the program replace the level of insurance needed.
Permanent Life Insurance plans include:
- Whole Life, can offer a level premium and a cash value table in the policy in some cases, guaranteed by the insurer;
- Limited Premium Payment, is a policy that can be paid up fully in a specific period of time (such as over 10 or 20 years; or paid up at age 65).
- Endowment Life is where the cash value grows to a level equal to the insurance coverage.
Life insurance premiums vary according to the policy type. In some cases, paying a little more premium offers enhanced benefits. Tax-deferral strategies may change due to legislation.