Types Life Insurance

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What types of life insurance are available?

There are two basic kinds of life insurance: Term and Permanent. A knowledgeable agent can help you decide which type of insurance would best fit your needs and whether a variation on these standard forms of life insurance, such as Universal life, may be applicable to you.

Term Insurance

Term Insurance provides financial protection for a specific term of time, such as ten years. The death benefits are paid only if you die within the term of years for which the policy is written. Term insurance can usually be renewed, often without a medical examination. Term insurance provides you with the greatest amount of coverage per premium dollar, but premiums will be higher each time you renew because you are growing older and creating more liability for the insurer. Most term policies are “convertible,” which means the policy can be traded for permanent life insurance protection. Keep in mind, premiums for the new policy will be higher than those paid for the term policy.

Permanent Insurance

Permanent life insurance provides you with exactly thatpermanent protection. Premium costs are averaged over your lifetime, so the premium does not increase with your age.
The most basic type of permanent insurance is Whole Life. Whole life policies develop cash values on a tax-deferred basis. This cash value can be used for a variety of purposes, including:

> Using the policy as collateral and borrowing up to the current cash value. This is useful for funding short-term obligations or financial needs. If you pass away before the loan is repaid, the amount you owe and interest is deducted from the life insurance proceeds.
> Payment of the premium to keep your policy in force. You may authorize the insurance company to borrow from your cash value to pay the premium thats due.
> Using the cash value to fund a paid-up policy at a reduced level of protection, if you wish to stop making premium payments completely.
> Utilizing the cash value available even if you elect to cancel the policy. And you pay taxes on the cash value only if it exceeds the amount of premiums you paid into the policy–what youve put in, is tax free to you and your family.

Universal Life

Universal life insurance holds features of both term and permanent insurance. Universal life not only offers life insurance protection, but it also accumulates cash, which is credited with interest earnings. Keep in mind, the amount you earn depends on current interest rates.

The premiums you pay are added to the cash accumulation portion of your universal life policy. Each month a deduction from the account value is made to provide for life insurance protection and other benefits. An administrative fee is also deducted from the cash accumulation.

Universal life offers some flexibility in the premium payments, allowing you to vary the timing and amount of your premium payments every year, or even skip a premium payment if you need. Through this policy, insurance continues as long as there is enough money in the cash accumulation to pay for the insurance charges accrued, and you can obtain cash from your universal life policy by borrowing or withdrawing from the account value at any time.

What type of policy should I choose?

This is where one of our experienced agents can help. Life insurance is a huge decision that deserves an expert opinion and guidance. Basically, in principle, all life insurance policies are designed to perform a similar function: pay an amount of money if you die. However, as noted, the differences among individual types of insurance policies can be significant. The type of policy you purchase should be thoroughly understood by you and based on your unique needs as well as your financial availability.

What products are available through OConnor Insurance Associates?

This is where one of our experienced agents can help. Life insurance is a huge decision that deserves an expert opinion and guidance. Basically, in principle, all life insurance policies are designed to perform a similar function: pay an amount of money if you die. However, as noted, the differences among individual types of insurance policies can be significant. The type of policy you purchase should be thoroughly understood by you and based on your unique needs as well as your financial availability.

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