Term Life Insurance

Term life insurance lasts for a specified number of years and then ends. You choose the term when you take out the policy, with common terms being 10, 20, or 30 years. The best-term life insurance policies balance affordability with long-term financial strength.

• Decreasing Term Life Insurance: This is renewable term life insurance where the coverage decreases over the life of the policy at a predetermined rate.
• Convertible Term Life Insurance: This allows policyholders to convert a term policy to permanent insurance.
• Renewable Term Life Insurance: This is a yearly renewable term life policy that provides a quote for the year the policy is purchased. Premiums increase annually and it is usually the least expensive term insurance initially.

Term life insurance is attractive to young people with children because parents can obtain large amounts of coverage at reasonably low costs. Upon the death of a parent, a significant benefit can replace lost income.

These policies are also well-suited for people who temporarily need specific amounts of life insurance. For example, the policyholder may calculate that by the time the policy expires, their survivors will no longer need extra financial protection or will have accumulated enough liquid assets to self-insure.

Term life insurance is for a predetermined period, typically between 10 and 30 years. Term policies may be renewed after they end, with premiums recalculated based on the holder’s age, life expectancy, and health. By contrast, whole life insurance covers the entire life of the holder. Unlike a term life policy, whole life insurance includes a savings component, where the cash value of the contract accumulates for the holder. The holder can withdraw or borrow against the savings portion of their policy, where it can serve as a source of equity.

Whole Life Insurance

Whole life insurance, also known as traditional life insurance, provides permanent death benefit coverage for the life of the insured. In addition to paying a death benefit, whole life insurance also contains a savings component in which cash value may accumulate. Interest accrues at a fixed rate and on a tax-deferred basis.

Whole life insurance policies are one type of permanent life insurance. Universal life, indexed universal life, and variable universal life are others. Whole life insurance is the original life insurance policy, but it does not equal permanent life insurance as there are many types of permanent life insurance.

Universal life insurance and whole life insurance are both permanent life insurance types that offer guaranteed death benefits for the life of the insured. However, a universal life policy allows the policyholder to adjust the death benefit as well as the premiums. As one might expect, higher death benefits require higher premiums. Universal life policyholders can also use their accumulated cash value to pay premiums, provided the balance is sufficient to cover the minimum due. Whole life insurance, alternatively, does not allow for changes to the death benefit or premiums, which are set upon issue.

Universal Life Insurance

Universal life (UL) insurance is permanent life insurance (lasting the lifetime of the insured) that has an investment savings element and low premiums similar to those of term life insurance. Most UL insurance policies contain a flexible-premium option. However, some require a single premium (single lump-sum payment) or fixed premiums (scheduled fixed payments).

Unlike term life, UL insurance policies can accumulate interest-bearing funds like a savings account. Additionally, policyholders can adjust their premiums and death benefits. Those paying extra toward their premium receive interest on that excess.

If you want to build tax-deferred savings and don’t expect to tap into the funds for a long time, universal life may be a suitable option. The cash value option that’s part of a universal life policy may be available for you to withdraw or borrow against in an emergency.

It’s a good idea to talk with your insurance provider to better understand your life insurance options. They can help you review your personal situation and long-term goals to choose a policy that’s a good fit for you and your family.

Understanding Annuities: A Reliable Option for Retirement Income

Annuities are financial products designed to provide a steady stream of income, typically used for retirement planning. They are offered by insurance companies and can be a valuable part of a diversified retirement strategy. Whether you are looking to secure guaranteed income for life, grow your savings on a tax-deferred basis, or protect your assets from market risk, annuities can offer flexible solutions to meet your long-term goals.

At their core, annuities work by converting a lump sum of money into periodic payments. These payments can begin immediately or be deferred until a later date, depending on the type of annuity selected. This predictable income can help cover essential expenses in retirement and reduce the risk of outliving your savings.

There are several types of annuities to choose from, each with unique features and benefits:

• Fixed Annuities: Provide guaranteed interest rates and consistent income payments. They offer security and are ideal for those who prefer low-risk investments.
• Variable Annuities: Allow you to invest in a range of sub-accounts similar to mutual funds. Returns can vary, and while they offer growth potential, they also carry more risk.
• Indexed Annuities: Offer returns based on the performance of a market index, such as the S&P 500, while protecting your principal from losses.
• Immediate Annuities: Begin paying income soon after you make a lump-sum payment—often within a year. These are suitable for individuals already in or near retirement.
• Deferred Annuities: Allow you to invest your funds and delay income payments until a future date, making them a good choice for long-term retirement planning.

In addition to providing income, annuities can also include optional features such as death benefits, long-term care riders, or inflation protection. These enhancements can add value and help address other financial concerns, such as healthcare costs or leaving a legacy.

While annuities offer many advantages, they are not one-size-fits-all. It’s important to understand the fees, surrender charges, and tax implications involved. Consulting with a financial advisor or insurance specialist can help you determine whether an annuity fits your overall financial strategy.

Annuities can serve as a powerful tool for those looking to create financial security in retirement. By offering predictable income, protection from market downturns, and customizable options, they provide peace of mind and a reliable foundation for the future.