LEARN ABOUT LIFE INSURANCE

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Life insurance is a contract between you and an insurance company. Essentially, in exchange for your premium payments, the insurance company will pay a lump sum known as a death benefit to your beneficiaries after your death.  Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. Your beneficiaries can use the money for whatever purpose they choose. 

Term life insurance is a policy that provides coverage for a specific term or period of time, typically between 10, 20 and 30 years.  The number of years it covers are limited, therefore, it generally costs less than whole life policies. But term life policies typically don't build cash value. So, you can't cash out term life insurance and premiums paid are not typically returned if the insured does not pass during the term of the policy. 

Whole life insurance provides permanent death benefit coverage for the life of the insured. In addition to paying a death benefit, whole life insurance also contains a savings component in which cash value may accumulate on a tax-advantaged basis. These policies may be known as “traditional” life insurance. These are typically more costly than a regular term policy. 

An IUL is  an Indexed Universal Life (IUL) insurance policy that allows the owner to allocate cash value amounts to either a fixed account or an equity index account. IUL insurance policies offer tax-deferred cash accumulation for retirement while maintaining a death benefit. 

Riders are the extra benefits that a policyholder can buy to add on to a life insurance policy. The most common include guaranteed insurability, accidental death, waiver of premium, family income benefit, accelerated death benefit, child term, long-term care, and return of premium riders. 

Typically the amount of insurance that is recommended to be purchased is at least 10 times the insureds salary. This is specific to each family as each family has different financial needs.. EX: a family with young children will have different needs than an individual spouse who is older and has no children to take care of. 

Things to consider: what is your salary or projected salary? What will the new expenses be for your family after your passing - childcare, food, medical, relocation, burial costs... how much burden do you want to relieve your family of? They will already be in dire grief, they do not need the additional stress of trying to figure out how they will now pay their bills or your debts once you are gone. 

Think of this as a plan for your family. A financial plan for your children's or lovely spouse's future so that they can have opportunities and less stress to deal with after your untimely passing. This can help them focus on grieving, healing and celebrating your life. 

Tomorrow isn't promised. Shoot, 2 minutes from now isn' t promised for anyone. The earlier you have a plan set in place, the better prepared your family will be. This a protection plan. This is YOU proving that you will take care of your family no matter the circumstance. Even a small amount of coverage would help your family tremendously, even if it's just enough to cover the cost of your burial plus inflation. If you are breathing now, you need life insurance. 

Cost depends on many factors: 

• Amount of coverage requested
• How many years you are purchasing (10, 15, 20, 30 years+)
• Additional Riders
• The age the benefits begin
• The type of policy you buy (term, whole, UIL, etc)

There are many factors, the above are just some. The cost can be as little as a $15 a month+. 

Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, are not taxable. However, any interest you receive is taxable (such as in a policy that builds cash value, ie: whole life/ IUL) and you should report it as interest received.  Life Insurance premiums paid are also not deductible on your tax return. Be sure to speak to a licensed tax professional or your attorney for details and to have your attorney review your policy as it is a binding contract. 

Danais Insurance Services Inc agents are not tax professionals. Information provided herein is information that can also be easily found elsewhere online.