NBGS ONLINE
Everything you wanted to know about insurance products … but were afraid to ask.
© NBGS Online 2010

A Life Insurance Primer

A life insurance policy is a type of contract one has with an insurance company in which the companies offers a death benefit (a lump-sum payment) to the stated beneficiaries of the insured, at the death of the insured, in exchange for payments made by the insured during his lifetime known as premiums. The goals and needs of the owner typically determine the type of life insurance. Permanent insurance such as universal and whole life give lifetime coverage to the insured while protection for a set period of time is giving by Term life insurance. It should be noted that there are no taxes on death benefits from all types of life insurance. Some of the varieties of life insurance include: Term life insurance This type of insurance offers financial protection for a set period of time like 15 or 25 years. Premiums are normally guaranteed and level for that time but may become substantially higher, if the policy offers continued coverage after the set period. The permanent life insurance options are usually more costly than term life insurance, the proceeds of which are mostly used in replacing lost potential income during working years. This could ensure that the financial goals of the family such as paying for college, keeping a business running, and paying off a mortgage, is met, and could also provide a general safety net for your beneficiaries. And while it is true that lost potential income could be replace by term life, it is important to note that no life insurance benefits are made like regular paycheck payments. They are paid in a lump sum. Universal life insurance This is a type of permanent insurance engineered to provide coverage throughout one’s lifetime. With universal life insurance, you can increase or reduce your coverage or premium all through your lifetime. These insurance types possess some component of tax-deferred savings and can grow wealth over some time. Universal life insurance normally has a higher premium than term because of its lifetime coverage. The most common use of the universal life insurance is as a flexible estate planning strategy with which wealth to be transferred to beneficiaries is preserved. Long term income replacement is another common use of universal insurance. The focus of some universal life insurance is providing death benefit coverage while others focus on building cash value and providing death benefit. Whole life insurance This is another type of permanent life insurance that also provides coverage throughout life and thus normally possesses higher premiums than any term life insurance, just like universal. Whole life insurance has a cash value, unlike term. This works as a savings component and can also amass tax-deferred. The premiums of this type of insurance are typically fixed. A common use for whole life is in the accumulation of tax-deferred savings, in addition to offering lifetime coverage. It may also be made use of as a tool for estate planning in preserving the wealth one intends to transfer to his/her beneficiaries.
Life Insurance Policy
NBGS ONLINE
Everything you wanted to know about insurance products … but were afraid to ask.
© NBGS Online

A Life Insurance

Primer

A life insurance policy is a type of contract one has with an insurance company in which the companies offers a death benefit (a lump-sum payment) to the stated beneficiaries of the insured, at the death of the insured, in exchange for payments made by the insured during his lifetime known as premiums. The goals and needs of the owner typically determine the type of life insurance. Permanent insurance such as universal and whole life give lifetime coverage to the insured while protection for a set period of time is giving by Term life insurance. It should be noted that there are no taxes on death benefits from all types of life insurance. Some of the varieties of life insurance include: Term life insurance This type of insurance offers financial protection for a set period of time like 15 or 25 years. Premiums are normally guaranteed and level for that time but may become substantially higher, if the policy offers continued coverage after the set period. The permanent life insurance options are usually more costly than term life insurance, the proceeds of which are mostly used in replacing lost potential income during working years. This could ensure that the financial goals of the family such as paying for college, keeping a business running, and paying off a mortgage, is met, and could also provide a general safety net for your beneficiaries. And while it is true that lost potential income could be replace by term life, it is important to note that no life insurance benefits are made like regular paycheck payments. They are paid in a lump sum. Universal life insurance This is a type of permanent insurance engineered to provide coverage throughout one’s lifetime. With universal life insurance, you can increase or reduce your coverage or premium all through your lifetime. These insurance types possess some component of tax-deferred savings and can grow wealth over some time. Universal life insurance normally has a higher premium than term because of its lifetime coverage. The most common use of the universal life insurance is as a flexible estate planning strategy with which wealth to be transferred to beneficiaries is preserved. Long term income replacement is another common use of universal insurance. The focus of some universal life insurance is providing death benefit coverage while others focus on building cash value and providing death benefit. Whole life insurance This is another type of permanent life insurance that also provides coverage throughout life and thus normally possesses higher premiums than any term life insurance, just like universal. Whole life insurance has a cash value, unlike term. This works as a savings component and can also amass tax-deferred. The premiums of this type of insurance are typically fixed. A common use for whole life is in the accumulation of tax-deferred savings, in addition to offering lifetime coverage. It may also be made use of as a tool for estate planning in preserving the wealth one intends to transfer to his/her beneficiaries.
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