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Permanent Life Insurance
Permanent Life Insurance is an umbrella term for life insurance plans that do not expire (unlike term life insurance) and combine a death benefit with a savings portion. This savings portion can build cash value against which the policy owner can borrow funds or, in some instances, withdraw the cash value to help meet future goals, such as paying for a child’s college education or other personal expenses. Generally speaking, there are three types of permanent life insurance: Whole Life, Universal Life, and Variable Life.
Term Life Insurance
Term Life Insurance provides coverage at a fixed rate of payments for a limited period of time, for example: 10, 15, 20 or 30-years. After the term period expires, coverage at the original rate of premiums is no longer guaranteed and the insured must either forgo coverage or potentially obtain further coverage with different payments or conditions. If the insured dies during the term, the death benefit will be paid to the beneficiary(ies). Some term products can be converted to a permanent product within a specified period of time or by a particular age. Term insurance is typically the least expensive type of life insurance to purchase.
An Annuity is a structured insurance product that is designed and guaranteed by a life insurance carrier. There are a variety of annuities available to assist investors in planning for retirement by offering tax-deferred accumulation or a guaranteed income stream. Typically, the annuitant (investor) makes a single cash premium to purchase the annuity.
At the time of purchase, the annuitant elects when to start receiving payments (when to annuitize the contract) and how long the payments should last. Annuitization provides a guaranteed income stream that cannot be outlived. Many contracts offer the option to defer payments from their purchase date in order to receive larger payments later, protect against increases in long-term care costs or provide the beneficiary(ies) a residual death benefit.
Long Term Care
Long Term Care (LTC) policies are available as a standalone/traditional LTC policy or a hybrid LTC policy which is attached as a rider to life insurance policies or annuities. Traditional LTC policies require the payment of an annual premium in return for specified financial assistance at a future date when and if the insured requires and qualifies for assistance.
The traditional LTC policy provides a “lose or use” benefit which means if the insured pays into the policy but never needs the financial assistance, he/she will not receive any monetary value from the contract. Today’s hybrid products are designed as riders that attach to life insurance policies and allow the insured to use a specified portion of the life insurance death benefit for the purposes of long-term care if required and if the insured qualifies according to the contract. If long-term care is never needed by the insured, the full death benefit goes to the designated beneficiary(ies).
Disability Insurance (DI) is a type of insurance that protects against the loss of a named beneficiary’s earned income due to a disability that prevents the insured from performing the core functions of his/her work. DI is available in the short or long term and has specific rules that define a disability and how a person qualifies for the benefits.