Many people understand how term life insurance works.
Individuals, on the other hand, frequently do not understand how
permanent insurance works.
To summarize, term life insurance protects you for a specific period of time. This is known as the "term."
If
you die within the time limit, your heirs will receive a predetermined
sum of money. This is known as the "death benefit." Term life insurance
is a low-cost option that is especially popular among parents who have
dependent children.
What exactly is Permanent Life Insurance?
Permanent
life insurance provides both a death benefit and lifetime protection.
Furthermore, it allows you to accumulate wealth while deferring taxes.
It is money that is available to you whenever and for whatever reason
you require it.
How Permanent Life Insurance Helps Build Wealth
Have
you thought about investing your tax refund to grow your wealth? If
this is the case, you should consider purchasing permanent life
insurance.
Marcus T. Henderson, Sr., RFP, AIF,
MRFC, president and CEO of Henderson Financial Group, Inc. in Brentwood,
Tenn., has been teaching about life insurance since 1989. He compares
the difference between term and permanent life insurance to the
difference between renting and buying a home.
"With
permanent life insurance, you genuinely own something and have equity,"
he explains. "Even if you never use the death benefit, you have money."
Several
customers, according to Marcus, have used the cash value of their
permanent life insurance over the years. It has helped people with home
purchases, financial emergencies, and other endeavors. "This is
especially true now, because people are living longer lives—people
frequently outlive their term insurance," he adds.
Other Benefits of Permanent Life Insurance
Aside from increasing your money, permanent life insurance has additional benefits. These are their names:
Consistent
returns provide comfort. Marcus recommends that customers compare the
rates of return on cash value accounts to those on savings and money
market accounts. The monetary value is almost always far greater. He
also cautions against comparing it to stock market rates. While stocks
can provide excellent returns, they are also much riskier.
There
are several policy options. Many clients, according to Marcus,
mistakenly believe there is only one type of permanent life insurance.
In reality, there are four distinct types. The primary differences are
whether you pay a fixed or variable premium and how you invest your
funds.
Coverage is available indefinitely. If
you continue to make payments, your perpetual life insurance policy's
"term" will never expire.
Costs tend to fall
over time. Marcus informs customers that the longer they keep their
permanent life insurance policy, the less it will cost them. "There is
even a point where the insurance starts paying for itself," he says.
The
benefits of living. Many permanent life insurance policies allow you to
customize your coverage so that you can use it while still alive. They
include critical care coverage in the event that you incur costs as a
result of a medical emergency.
Long-term care insurance
protects you in the event that you require home health care, nursing
home care, personal or adult day care, or any combination of these
services.
If you have a terminal illness, you can receive your death benefit money sooner.
Consider a Term-to-Permanent Insurance Policy.
Some term life insurance policies can be converted into permanent life insurance policies later.
Marcus
often advises his clients on "term to permanent" plans. One major
reason for this is that future ill health may prevent you from obtaining
permanent life insurance. "With term plans that include conversion
options, you can receive permanent insurance as if you were a younger
version of yourself," he explains.
Isn't life insurance supposed to cover funeral and burial expenses?
Yes!
That's correct. Many Americans are well aware of this. According to the
Life Happens and LIMRA 2021 Insurance Barometer Study, it is the most
common reason people have life insurance.
With a
special report titled "Black Americans: Life Insurance Attitudes and
Ownership," this year's survey delved deeper into the Black community's
perspectives and attitudes. According to the study, Black Americans
understand what life insurance accomplishes when someone dies. Half of
all Americans (48%) believe they have life insurance to cover final
expenses, with Black Americans having a higher rate of 66 percent.
However, this is only a portion of the story.
What
happens to a family's home, bills, children's education, and retirement
plans if a critical source of income is lost due to the death of a
loved one?
How will those expenses and dreams be paid for tomorrow, the next day, next year, and so on?
That
is also why there is life insurance. Many people, however, are unaware
of the full scope of what a comprehensive life insurance plan can
accomplish in the long run. In fact, only one-third of Americans (35%)
say the primary reason for having life insurance is to replace lost
wages or income, and this percentage is slightly lower among Black
Americans (31 percent ).
The following expenses can be covered by life insurance:
IMMEDIATE EXPENSES
funeral and burial costs
medical expenses
whether to buy or rent a car
Credit card debt taxes estate settlement fees
CURRENT BILLS AND EXPENSES
food, housing, utilities, transportation, health care, and insurance, as well as the survival of a family business
GOALS FOR THE FUTURE
College costs
Insurance for life Retirement Living Advantages
In
addition to income replacement, your policy may include living
benefits. Permanent (as opposed to term) life insurance accumulates
monetary value over time. And you can use that money however you want -
to help pay for a down payment on a home, to cover an unexpected need,
or even to supplement your retirement income. (However, keep in mind
that withdrawing or borrowing money from your policy may reduce its cash
value and death benefit, as well as result in tax consequences if not
repaid.) Furthermore, life insurance can help you leave a financial
legacy for your place of worship, alma mater, or any other organization
that is important to you.
Keep in mind that
life insurance is much more than "burial insurance." It could be a gift
that keeps on giving long after you're gone. For more information, visit
the life insurance 101 section of this website or contact an insurance
agent to help you choose coverage that fits your budget.