Life Insurance
Life insurance is a contract where you pay a company regular premiums. In return, the company promises to pay a lump sum of money, known as a death benefit, to the person or people you name as beneficiaries when you die.
Its main purpose is to provide financial security for your loved ones so they can cover expenses like a mortgage, daily living costs, or funeral expenses after you are gone.
Term Life
Temporary Coverage: It's designed to last for a set number of years, typically 10, 20, or 30 years.
Fixed Premiums: The payments you make, called premiums, usually stay the same for the entire term.
Pure Protection: If you pass away during the policy's term, your beneficiaries receive a death benefit. If you outlive the term, the policy simply expires and there is no payout.
Whole Life
Lifelong Coverage: The policy is guaranteed to stay in force for your entire life.
Fixed Premiums: The amount you pay for the policy, called the premium, is set at the time you purchase it and never increases.
Cash Value: A portion of your premium goes into a cash value account, which grows over time at a guaranteed rate. You can borrow against this cash value or withdraw from it while you are still alive.
Indexed Universal Life
Tied to a Market Index: The growth of the cash value is linked to the performance of a major stock market index, such as the S&P 500. It's important to know that your money isn't directly invested in the market. Instead, the insurance company uses the index's performance to determine how much interest to credit to your policy's cash value.
Downside Protection: Most IUL policies include a "floor," which is a guaranteed minimum interest rate (often 0%). This means that even if the market index has a negative return, your cash value will not lose money due to market performance.
Growth Caps: There is usually a "cap" on the amount of interest you can earn in a given year. This limits your upside potential in a strong market, which is how the insurance company can afford to offer the downside protection.
Guaranted Universal Life (GUL)
Focus on the Death Benefit: Unlike whole life or other universal life policies, GUL is not designed to build a large cash value. Its primary purpose is to provide a guaranteed death benefit.
Lower Cost: Because it has little to no cash value component, GUL policies typically have lower premiums than whole life insurance for the same amount of coverage.
Fixed Premiums: The premium payments are set from the start and do not change, providing predictable costs for the life of the policy.
Life with Long Term Care (LTC) & Hybrid Life
Dual-Purpose Coverage: The policy has a death benefit, just like traditional life insurance, but it also has a pool of money you can access while you're still alive to pay for long-term care expenses.
"Use-It-or-Lose-It" Problem Solved: A major advantage is that the money you pay into the policy is never "wasted." If you need long-term care, the policy helps cover those costs. If you never need long-term care, the full or a partial death benefit is still paid out to your beneficiaries.
Accessing Benefits: To trigger the long-term care benefit, you must typically be certified as needing help with at least two of the six "activities of daily living" (such as bathing, dressing, or eating) or have a severe cognitive impairment. The funds used for long-term care are usually an "acceleration" of the death benefit, meaning the amount paid to your beneficiaries upon your death will be reduced by the amount you used for care.
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