Life insurance! Just the mention of it brings preconceived ideas to mind!
Back in the ’80s, used car salesmen and life insurance salesmen were considered to be “two peas in a pod!” Just the mention of life insurance sent people scurrying!
The old “whole life” policies were expensive, and the cash value in the policy never gave much of a return. “Term insurance” was also expensive, and the underwriting process was cumbersome at best.
My, how things have changed! Today life insurance is one of the most important tools we have to ensure that financial goals and objectives are met. Life insurance can play an important part in providing a death benefit for a variety of reasons.
There are two main types of life insurance policies; term life insurance and permanent life insurance.
Term insurance provides coverage for a specific period, usually between one to 30 years, and pays a death benefit if the policy holder dies during that period.
On the other hand, permanent life insurance provides coverage for the policy holder’s entire life, and the death benefit is paid out whenever the policy holder dies. The cash value in the permanent life policy can now work in a variety of ways and can be designed to fit the goals and objectives of the policy holder. The return for the cash value can be determined by a “fixed interest rate” return, a “variable” or “stock and bond managed” approach, or a “fixed-indexed” approach.
Many life insurance policies now offer health enhancement benefits that promote healthy living. Policyholders can earn discounts on their premiums, or cash can be added to the value of the policy by participating in wellness programs or achieving specific health goals, such as quitting smoking or losing weight. These benefits not only help policyholders save money on their premiums, but they do much more. Healthy living habits will add cash to the investment portion, provide gift cards and discounts for travel expenses and more.
Exercise and healthy eating are important aspects of these “health enhancement policies,” which encourage policyholders to live a healthier lifestyle!
Life insurance can be an important part of an estate-planning strategy. Policyholders can name their beneficiaries and ensure that their loved ones are taken care of after their death. Additionally, life insurance can be used to provide a source of income for a surviving spouse or children.
A “second-to-die” policy is a valuable estate planning tool that will have a much more reasonable premium than a “one-life” policy and will provide a way to pay estate taxes.
Through a “minimal death benefit policy,” a plan for safe, tax-free income can be added to a financial plan.
Life insurance can be purchased individually by a person for themselves or by a company for their employees. Employer-sponsored life insurance policies can provide coverage at a lower cost than individual policies, and the premiums may be paid for by the employer. Group life insurance policies may also offer higher coverage limits than individual policies.
Many life insurance policies now offer long-term care benefits that provide coverage for nursing home care or in-home care. These benefits can be added as a rider to a life insurance policy or purchased as a separate policy. This type of coverage can help ease the financial burden of long-term care for policyholders and their loved ones.
The evolution of life insurance policies has allowed them to provide more benefits and options for policyholders.
While the primary purpose of life insurance remains to provide financial protection for loved ones after a policyholder’s death, additional benefits such as health enhancement, estate planning and long-term care can provide added peace of mind and financial security for policyholders and their families. Today life insurance really should be considered another “asset class.”
The next time you hear from a life insurance salesman, don’t scurry away! He could have some very valuable information for you, your family and loved ones!
And remember, stay the course!
Tim Tremblay is president of Tremblay Financial Services in Santa Barbara (www.tremblayfinancial.com).