There are several different types of Life Insurance. The type of life insurance you purchase depends on what your goal is.
One of those types is called Term Life Insurance which can help your family replace the income they would have received if you were to pass away prematurely before you are done working. For example, if you plan to work until you are 65 years old, but you pass away early at 55 then your family will not have those 10 years of income you would have provided. Having a Term Life Insurance policy in the amount of 10 years of your annual income would allow your family to replace the income they would lose if you passed away early.
A second type of life insurance is called Universal Life Insurance. If you want to create an estate for your family, you can purchase a Universal Life Insurance policy. This type of policy is intended to be paid for the entire life of the insured person, but the premium never changes no matter how old you get. Using one of these policies is a very efficient way to make sure you will be leaving tax free money for your heirs and/or other beneficiaries of your choosing.
A third type of Life Insurance is called Cash Value Life Insurance. This type of policy can help you during your lifetime and not just help your family when you pass away. A Cash Value Life Insurance Policy allows the policy owner to accumulate money that will grow over time because the insurance company pays a dividend. Although there is a death benefit the main purpose a person would purchase a Cash Value Life Insurance policy is to accumulate money that can be used later. If the money built up in the Cash Value Life Insurance policy is distributed to the owner in the proper manner, then there is no income tax on the distribution of the cash to the policy owner. This type of policy is the most misunderstood by the public and is a tremendous tool for tax free accumulation of money.
Recent Comments