Life insurance protects your family when the unexpected happens, enabling your loved ones to have a secured financial future.
Overview: Short Term Life Insurance
1. Term Life insurance provides coverage for a specific number of years such as 5, 10, 20, or 30 years, etc.
2. If the insured dies during the term period, the death benefit is paid to the beneficiary in a lump sum.
3. If the insured survives the term period and wants to continue with the policy, the premium can be extremely high.
Term Life insurance is suitable for individual with limited budget that wants financial protection for a specific number of years.
Overview: Permanent Life Insurance with Variable Cash Value Option
1. Universal Life (UL):
The cash value earns a fixed interest based on market rates.
2. Variable Universal Life (VUL):
The policyowner has the ability to invest in mutual funds. The cash value can be increased or decreased depending on the investment.
3. Indexed Universal Life (IUL):
The cash value can earn interest based on a stock market index chosen by your insurer, such as the S&P 500 or the Nasdaq Composite. Please be advised this is different than investing in the stock market directly.
Universal Life insurance is suitable for people who are looking for premium flexibility.
Caution: Universal Life insurance policy is subject to COI (Cost of Insurance). COI are monthly administrative fees calculated mainly based on insured's age. Therefore, COI will increase as the insured gets older. Meanwhile, investment loss or taking loans from the policy will also decreases the cash value. The policy will be lapsed if there is insufficient cash value and the insured will be required to pay additional premiums.
1. Guaranteed Universal Life insurance is guaranteed to be paid-up at the end of the payment period, so no payment is required at later ages.
2. Guaranteed Universal Life insurance is seen as an extended Term Life that never expires and has a guaranteed death benefit for the entire life of the insured.
3. No cash value for the insured to utilize during his/her lifetime.
Guaranteed Universal Life insurance is suitable for people who want family financial protection and estate planning but have no need for cash.
1. Guaranteed Whole Life insurance policy is guaranteed to be paid-up at the end of the payment period, so no payment is required at later ages.
2. Guaranteed Whole Life insurance policy is a permanent life insurance protection with cash value.
3. Guaranteed Whole Life insurance policy pays interests and dividends annually which will increase policy's cash value and death benefit.
GWL insurance provides more than financial protection for your family. GWL has multiple functions including funding for your children's education, capital for starting a new business, retirements, and/or long-term care, etc.
U.S. insurance regulators protect consumers and monitor the financial health of insurance companies to prevent them from bankruptcy. If bankruptcy does occur, your policy will be transferred to a new insurance company that takes over. The new company reserves the right to adjust your premium or coverage. Rate increase can be up to 30%. Therefore, you should always choose a trusted and high rating insurance company (A or higher).
Death benefit is not subject to income tax, but it is subject to estate tax which is taxed at 40% on the amount that exceeds the lifetime exclusion. If you expect your estate to exceed your lifetime exclusion on your Date of Death, you should consider moving your life insurance policy into an Irrevocable Life Insurance Trust (ILIT).
There are two options to take money out from your life insurance policy. One option is to make a withdrawal which is taxable as income tax if the amount excesses your total premium payments. For example, your total premium is $100,000 and you make a $150,000 withdrawal. The taxable amount is $50,000. A second option is loan which is non-taxable.
No. if you borrow from your life insurance policy, even when the amount is more than you principal, it is tax-free.
No. Indexed Universal Life insurance policy uses index as reference only to distribute interest to policyholders while Whole Life policy receives dividends. IUL interest has “cap” and “floor.” Floor in here does NOT mean you won't lose your principal. Floor interest minus high costs & expenses can still mean negative return. Also, the older you are, the higher your cost of insurance. Indexed Universal Life insurance comes with 3 critical uncertainties: uncertainty of number of payment periods, cash value, and death benefit.