FAQ

Life insurance is a contract between an individual (the policyholder) and an insurance company. In exchange for regular premium payments, the insurance company provides a lump-sum payment to the policyholder’s beneficiaries upon the policyholder’s death as well as payments in the event of a chronic, critical, or terminal illness.

Life insurance provides financial protection for your loved ones in case of your untimely passing. It can help cover expenses like funeral costs, outstanding debts, mortgage payments, and provide financial support and security to your family in difficult times.

There are several types of life insurance, including term life insurance, whole life insurance, and universal life insurance. Each type has unique features, benefits, and costs.

Term life insurance provides coverage for a specific period, typically 10, 15, 20, or 30 years. If the policyholder passes away during this term, the beneficiaries receive the death benefit. If the policyholder survives the term, the coverage ends.  Return of Premium (ROP) is a feature offered in certain types of term life insurance. It provides a refund of the premiums paid by the policyholder over the term of the policy if the policyholder outlives the term of the policy.

Term life insurance is a type of life insurance policy that provides coverage for a specific period or “term,” such as 10, 20, or 30 years. It’s designed to pay a death benefit to your beneficiaries if you pass away during the policy term. Unlike whole or universal life insurance, term life insurance has no cash value—it’s purely a form of financial protection.

Key Features of Term Life Insurance

1. Fixed Term Lengths
   • Coverage is offered for a set period, like 10, 20, or 30 years.
   • If you outlive the term, the policy expires, and no payout is made unless the policy is renewed.
2. Affordable Premiums
   • Term life insurance is generally much cheaper than permanent policies because it only provides a death benefit without cash value accumulation.
   • Premiums stay fixed for the duration of the policy.
3. Pure Death Benefit Protection
   • If you pass away during the term, your beneficiaries receive the death benefit, which is typically a tax-free lump sum.
   • If you survive the term, the policy has no value unless converted or renewed.
4. Conversion Options
   • Many term policies offer an option to convert to a whole or universal life policy before the term expires, though this may result in higher premiums.

Types of Term Life Insurance

1. Level Term
   • The death benefit and premiums stay the same throughout the term.
   • Example: A 20-year, $500,000 policy has the same coverage for all 20 years.
2. Decreasing Term
   • The death benefit decreases over time (often used for mortgage protection), while premiums may stay the same.
   • Example: A policy that aligns with the decreasing balance of a mortgage loan.
3. Renewable Term
   • You can renew the policy at the end of the term, but the premiums will increase based on your age at renewal.

Pros of Term Life Insurance

• Lower premiums compared to permanent life insurance.
• Simple and easy to understand.
• Ideal for temporary needs, such as income replacement or debt coverage.
• Provides high coverage at an affordable price during critical life stages (like raising children or paying off a mortgage).

Cons of Term Life Insurance

• No cash value or savings component.
• If you outlive the term, the policy expires with no payout (unless renewed or converted).
• Renewal premiums can become expensive as you age.
• Not ideal for lifelong protection or estate planning purposes.

Who Should Consider Term Life Insurance?

• Individuals with young families or dependents who need coverage for a specific time (like until children are grown or a mortgage is paid off).
• Those seeking affordable protection to replace income if they pass away unexpectedly.
• People who want temporary coverage for debts or major financial obligations.

Term life insurance is a cost-effective way to ensure financial protection during key life stages without the long-term commitment or higher costs of permanent life insurance.

Whole life insurance is a type of permanent life insurance that provides lifelong coverage along with a savings component called cash value. As long as you pay your premiums, the policy remains in effect, and your beneficiaries receive a death benefit when you pass away.

Key Features of Whole Life Insurance

1. Lifelong Coverage
   • The policy covers you for your entire life, not just for a fixed term (like 10 or 20 years).
   • As long as premiums are paid, your beneficiaries receive the guaranteed death benefit when you die.
2. Fixed Premiums
   • Premiums remain the same throughout the life of the policy.
   • This makes budgeting easier, especially compared to policies that increase in cost over time.
3. Cash Value Component
   • Part of your premium goes into building cash value, which grows over time on a tax-deferred basis.
   • The cash value earns interest at a guaranteed rate or sometimes higher based on dividends (if the insurer is a mutual company).
4. Access to Cash Value
   • You can borrow against the cash value, withdraw funds, or use it to cover premiums.
   • Loans or withdrawals reduce the death benefit unless they are repaid.
5. Guaranteed Growth
   • The cash value grows steadily, making it a low-risk savings tool.
   • Some policies from mutual companies also pay dividends, which can increase the policy’s value or reduce premiums.

Pros of Whole Life Insurance

• Lifetime protection with a guaranteed payout to beneficiaries.
• Fixed premiums provide consistency in payments.
• Cash value grows predictably, offering a source of funds if needed.
• Tax-deferred savings and the potential for dividends (in some cases).

Cons of Whole Life Insurance

• More expensive than term life insurance.
• Limited flexibility: Adjusting the premium or death benefit can be challenging.
• If you need large coverage for a short period, term life insurance may be more cost-effective.
• Loans or withdrawals reduce the death benefit if not repaid.

Whole life insurance works well for those seeking lifelong coverage, a savings vehicle, or estate planning benefits. It’s often used by people who want to leave a legacy, cover end-of-life expenses, or build cash value they can tap into during retirement.

An Indexed Universal Life (IUL) policy is a type of permanent life insurance that offers a death benefit along with a cash value component, which can grow over time based on the performance of a stock market index, such as the S&P 500. Here’s a breakdown of its key features:

1. Permanent Life Insurance

• Coverage lasts for the policyholder’s entire life, as long as premiums are paid.
• It provides a death benefit to beneficiaries upon the policyholder’s death.

2. Cash Value Accumulation

• Part of the premium goes toward building cash value.
• The growth of the cash value is tied to the performance of a selected market index, though you don’t invest directly in the stock market.

3. Growth with Protection

• IUL policies often have a cap rate (maximum return) and a floor rate (minimum return, often 0%).
  • If the index performs well, cash value grows up to the cap.
  • If the index performs poorly, the floor ensures you don’t lose value (but it won’t increase during downturns).

4. Flexible Premiums and Benefits

• You can adjust the premium amounts and even use the cash value to cover future premiums.
• Death benefits can also be adjusted over time, depending on policy terms.

5. Tax Advantages

• The cash value grows tax-deferred.
• Loans or withdrawals can be taken from the cash value, often tax-free, though this may reduce the death benefit.

Pros

• Potential for higher cash value growth than traditional whole life insurance.
• Flexibility in premiums and death benefits.
• Offers downside protection with the floor rate.

Cons

• Market index performance can limit growth (due to cap rates).
• Fees and complexity are higher than term life policies.
• If mismanaged, the policy may lapse or lose value.

IULs can be a good fit for individuals looking for long-term protection with a potential for growth, but it requires careful management and understanding of fees, cap rates, and market risks.

Accelerated Death Benefit (ADB): This allows the policyholder to receive a portion of the death benefit if they are diagnosed with a qualifying terminal illness. It provides financial assistance to cover medical expenses and other costs associated with end-of-life care.

Critical Illness Benefit: This provides a lump-sum payment if the policyholder is diagnosed with a covered critical illness such as cancer, heart attack, stroke, or other severe medical conditions. The funds can be used for medical treatments, home modifications, or any other expenses related to the illness.

Chronic Illness Benefit: This benefit is designed for policyholders who are unable to perform basic activities of daily living due to a chronic illness. It provides regular payouts to cover costs associated with long-term care, such as nursing home expenses or in-home care.

Long-Term Care Rider: This allows the policyholder to use a portion of the death benefit to cover long-term care expenses, including nursing home care, assisted living, and in-home care. It helps address the costs associated with aging or chronic health conditions.

Waiver of Premium: While not a traditional living benefit, this provision waives the policyholder’s premium payments if they become disabled and are unable to work. The policy remains in force, and premiums are covered by the insurance company.

Living benefits can provide crucial financial support during challenging times, offering peace of mind and alleviating some of the financial burdens associated with serious illnesses or disabilities.

The amount of life insurance you need depends on factors like your income, outstanding debts, expenses, and financial goals. It’s recommended to have coverage that can replace your income for several years.

Consider your financial situation, long-term goals, and current needs. Evaluate the different types of policies with our agents and we will compare quotes from reputable insurers for the best option.

Yes, depending on the type of policy you have, there may be options to adjust coverage, premium payments, and beneficiaries.

In most cases, the death benefit from a life insurance policy is not taxable for the beneficiary. However, if the policyholder’s estate exceeds a certain threshold, it may be subject to estate taxes.

To file a life insurance claim, you’ll need to contact the insurance company and provide them with the necessary documentation, including a death certificate and any required forms. The insurer will guide you through the process.  We compassionately assist all of our clients through this process during their time of grievance.

They are additional/optional provisions you can add on to your main policy.

Guaranteed Insurability Rider

As you age, your health may change, making it difficult to secure additional life insurance. The guaranteed insurability rider comes to your rescue. Once your original policy is approved, this rider allows you to increase coverage at specific times without undergoing additional medical screenings.

Waiver of Premium

Prepare for unexpected financial challenges with the waiver of premium rider. If certain conditions are met, such as total disability preventing you from working, this rider exempts you from paying premiums.

Accidental Death Benefit

This rider boosts your death benefit if you pass away due to an accident. It serves as an additional financial safety net for your family in the event of an unforeseen loss.

Accelerated Death Benefit: Terminal Illness Rider

Access your life insurance funds before passing away with the terminal illness ADB rider. To qualify, a terminal illness diagnosis with a life expectancy of less than one to two years is required.

Accelerated Death Benefit: Chronic Illness Rider

The chronic illness rider, another form of accelerated death benefit, necessitates a diagnosis of a chronic illness. Many insurers require an inability to perform at least two of the six daily living activities for approval.

Accelerated Death Benefit: Critical Illness Rider

To qualify for the critical illness rider, a diagnosis of a critical illness is required. Although specific requirements vary among insurers, conditions such as cancer, heart attack, or kidney failure typically meet the criteria.

Child Rider

The child rider adds a small death benefit to your policy for your minor children. When they reach adulthood, they may have the option to convert this coverage into their permanent policy.