Key Man Life Insurance
Can pay a death benefit whenever you die whenever you may die– even if you live to 100! There are four major types of whole life or permanent life insurance – traditional whole life, universal life, and variable universal life, and most recently Index life. Business owners may use various forms of life insurance given the end goal and costing of each.
One should consult a professional before attempting to choose between the many forms of Cash Value insurance available.
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Term Life Insurance:
Term Policies provide life insurance for a specified period of time. These policies provide benefits in the event of death, but they generate no cash value. Keep in mind that the cost of term insurance increases as you get older, which may make it more expensive than cash value insurance in the long run. Most companies will not sell term insurance to an applicant for a term that ends past his or her 80th birthday.
Benefits of Term Life Insurance provides life insurance for a specific period of time, or “term”. Term life insurance provides only “pure” insurance protection and does not have the savings feature typically found in most permanent “cash-value” life insurance policies. This type of insurance offers the users a choice of terms from 1 year renewable up to 30 year terms. The renewable options are usually only available for the shorter terms, 1 to 5 years. The premium for the term remains the same throughout the term, the most popular nowadays is the 20 year term. In certain cases you can also opt for a term to a specified age, usually 65.
Term life insurance is most useful when an insured person is relatively young and the need is for temporary or short-term coverage. Young, growing families with limited income and a high insurance need represent one situation where term life insurance works very well. Situations where a need will decline over time, such as with a home mortgage, are also good candidates for term life insurance. The younger you are when you take out a term policy, the cheaper the premiums. Because the premiums will not increase over the term, the longer the term the more money you save. Thus a young person can have a very high insurance death benefit for a relatively small premium up to the age of 65.
Another benefit may be “Return of Premium” as some insurers have created term life with a “return of premium” feature. The premiums for the insurance with this feature are often significantly higher than for policies without it, and they generally require that you keep the policy in force to its term or else you forfeit the return of premium benefit.
Annual Renewable Term Life Insurance
Defined: Annual renewable term life insurance is term insurance that renews every year. With term life insurance, you are covered only for the specified term of the policy. Most term life policies last between five and thirty years, at which point you either renew or no longer have coverage. However, with annual renewable term life insurance, the policy covers you only for one year, at which point you have the option to renew.
Benefits of Annual Renewable Term Life Insurance
Annual renewable term life insurance provides you with a flexible life insurance option. Since the policy renews on a yearly basis, there is no long-term commitment to pay premiums or buy coverage. As such, this can be a great option for people who need coverage only for a period of time, such as when they are in between jobs.
Annual Renewable Term Life Insurance Premiums: Affordability is another advantage of an annual renewable term life insurance policy. The premiums, initially, may be much lower than you would pay for a long-term policy. This is because there is less of a statistical chance that you will die within the yearlong period, as opposed to a higher risk that you might die over five, fifteen or thirty-year terms which are common in term life policies.
However, as you age, your premiums generally increase slightly each year. Thus, unlike standard term life insurance with a longer period, you will pay more as you age instead of having a fixed premium for the life of the policy. In addition, eventually you may age-out of being able to buy coverage, or coverage may become prohibitively expensive when you get older.
Disadvantages of Annual Renewable Term Life Insurance Policies: The major disadvantage of annual renewable term life insurance is the relatively short period for which you have protection. At the end of the yearlong period, you may be unable to afford the increase in premiums, especially if your premiums increase directly. Furthermore, if something happens to you- such as getting diagnosed with a terminal illness- it may be difficult or impossible to renew your policy unless the insurance contract states that the insurer must renew at a capped maximum.
Should You Choose An Annual Renewable Term Life Insurance Policy? If you do not have the money to afford larger monthly payments for a longer periods of time this will fill a short term need.
Universal Life Insurance: offers you more flexibility than whole life insurance. You may be able to increase the death benefit, if you pass a medical examination. The savings vehicle (called a cash value account) generally earns a money market rate of interest.
Benefits of Universal Life Insurance Universal Life: is similar in some ways to, and was developed from whole life insurance. The advantage of the Universal Life policy is in its flexibility and the potential for greater cash value growth. It offers you the chance to change the policy (within limitations) to suit your changing needs. If things go well, you can increase the investment part of the policy to take advantage of higher growth rates. If you find yourself with financial difficulties, you can use the accumulated cash to continue premium payment.
Universal Life Insurance offers you more control over your insurance needs with the following benefits:
Tax-Free Death Benefits