Life Insurance is not only a way to protect the people you love, it can also be an important part of your financial planning strategy.
Bluntly stated, the main purpose of a life insurance policy is to provide cash to your family after you die. This can be used for many things - to help pay the mortgage, run the household, ensure your dependents aren’t burdened with debt, fund education expenses, and provide a sense of security while your family adjusts.
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Life Insurance benefits: |
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· Your first premium creates a permanent estate, regardless of how soon death occurs.
· There are no probate or administration costs, or delays in settling an insurance claim, if the proceeds are paid to a named beneficiary.
· In general, life insurance proceeds are income tax free.
· Premium costs can be fixed, or flexible, depending on your needs.
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There are two major categories of Life Insurance:
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Permanent Life Insurance (Whole, Universal, or Variable)
· Provides life long protection - as long as you continue to pay the premiums the death benefit will be paid.
· Builds ‘cash value’ - this is the amount available if you surrender a policy before its maturity, this is different than the face value of the policy that is paid at death. The cash value can be received as a lump sum, used to pay the premiums of the policy, or you can borrow the money from the insurance company (Note - There are tax consequences to these choices, and if the money is borrowed it must be paid back with interest).
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· Term life insurance is temporary - it usually provides coverage for a limited period, such as, one, two, five, ten, twenty, or thirty years.
· Most term coverage is renewable - the policy can be renewed for additional periods of time without evidence of insurability, however the premium is increased at each renewal based on age.
· Does not build cash value.
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Copyright 2018 - Petretti & Associates, Inc.
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