February 2010 - Susman
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Life is one of the cornerstones of financial planning

In this issue of the “Insurance Reporter,” we explain the principal types of life insurance and why you should choose one type of product over another. We also put forward the benefits of whole life insurance in these challenging economic times. It is now out-performing the stock market much of the time in the cash value it builds, not to mention the simultaneous benefit of protecting one’s family. Read the six reasons why you need life insurance, get some help in determining how much life insurance you really need, and more.

What Are The Principal Types Of Life Insurance?

There are two major types of life insurance-term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were term and about 7.1 million were whole life.

Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.

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How Should I Choose What Type Of Life Insurance To Buy?

You should consider term life insurance if:

  • You need life insurance for a specific period of time. Term life insurance enables you to match the length of the term policy to the length of the need. For example, if you have young children and want to ensure that there will be funds to pay for their college education, you might buy 20-year term life insurance. Or if you want the insurance to repay a debt that will be paid off in a specified time period, buy a term policy for that period.

You should consider permanent life insurance if:

  • You need life insurance for as long as you live. A permanent policy pays a death benefit whether you die tomorrow or live to be 100.

  • You want to accumulate a savings element that will grow on a tax-deferred basis and could be a source of borrowed funds for a variety of purposes. The savings element can be used to pay premiums to keep the life insurance in force if you can’t pay them otherwise, or it can be used for any other purpose you choose. You can borrow these funds even if your credit is shaky. The death benefit is collateral for the loan, and if you die before it’s repaid, the insurance company collects what is due the company before determining what’s goes to your beneficiary.

The Benefits Of “Whole Life Insurance” In This Economy

With the unemployment rate topping 8.5 percent, and with more layoffs and job cuts still expected, many households are forced to create a strict budget, even as their debts continue to rise. People are definitely more worried than ever about their financial well-being, and, if they are also worried about the financial well-being of their family, they should invest in whole life insurance; a life insurance policy that pays their loved ones after their untimely death, with some added benefits.

Even if you are retired or feel strongly that your income stream is safe, you might want to consider in these times of volatile stock and bond markets some stable long-term savings options found in many insurance plans. Here’s why:

A whole life policy can act as a buffer against estate taxes and probate costs and provides a death benefit along with a living cash benefit-a unique feature. In addition, a whole life policy allows someone at the time of retirement to remain insured while spending the other assets they’ve accumulated or pursuing a more aggressive investment strategy for those assets.

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