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Life Insurance

AP&L Consult Life Insurance

Life Insurance

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A life insurance policy is a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death. Typically, life insurance is chosen based on the needs and goals of the owner.

When many people think of life insurance policies, they usually don’t think of all the types of life insurance, they only think term.

Term life insurance policies are the simplest, most popular, and the most often purchased; but, in the life insurance menu of options, it’s not the only choice. Far from it, actually.

Today, there is a wide variety of life insurance policies available, the most basic of which are term and permanent. Within each of these categories, however, there are many different types to choose from – and being familiar with these can help you better customize the coverage to meet your specific needs.

The different types of life insurance policies available today include:

  • Term Life Insurance
  • Permanent Life Insurance
  • Whole Life Insurance
  • Universal Life Insurance
  • Variable Life Insurance
  • Variable Universal Life Insurance
  • Survivorship Life Insurance
  • Final Expense Life Insurance
  • No Medical Exam Life Insurance
  • Key Man Life Insurance
  • Increasing and Decreasing Term Life Insurance
  • Group Life Insurance
  • Accidental Death and Dismemberment (AD&D) Insurance

Term Life Insurance Policies

Term life insurance is considered to be the most basic of life insurance that can be purchased.

This is because term life offers just pure death benefit protection only, without any cash value build up within the policy.

Permanent Life Insurance Coverage

Permanent life insurance is different from term insurance because it offers both death benefit protection, as well as a cash value component. It also differs because, as the name suggests, it does not have a time limit like term insurance, but rather is intended to last for the remainder of the insured’s lifetime – provided that the premium is paid.

Whole Life Insurance Coverage

The simplest type of permanent life insurance coverage is whole life. With this type of coverage, the premium amount is locked in and will remain the same throughout the entire lifetime of the policy.

This can be helpful for those who need to stick to a budget. It also means that if a person purchases a whole life policy at a very young age, they will still pay the same amount of premium when they get older – regardless of advancing age, or even an adverse health issue.

Universal Life Insurance Coverage

Another form of permanent coverage is universal life insurance. This type of life insurance also provides a death benefit and a cash value component where the funds are allowed to grow tax-deferred.

Universal life insurance is more flexible than whole life coverage because the policyholder is allowed – within certain guidelines – to choose how much of his or her premium dollars will go towards the policy’s death benefit, and how much will go towards the policy’s cash value.

Because universal life is a permanent life insurance policy, the policyholder will have access to their cash value account. So, just as with a whole life plan, the cash can be borrowed or withdrawn for any reason – including paying off debt, supplementing retirement income, or even going on a vacation.

Variable Life Insurance Coverage

Variable life insurance is also a form of permanent life insurance coverage. These types of life insurance policies offer a death benefit, as well as a cash component.

However, with variable life insurance, the policyholder can take part in a variety of different investment options such as equities.

This means that their funds have the opportunity to grow a great deal more than the funds in a whole life policy can. It also means that there can be more risk as funds are exposed to the ups and downs of the equities market.

Variable Universal Life Insurance Coverage

Variable Universal life insurance is similar to regular universal life insurance coverage, except in this case, the policyholder is allowed to invest the cash in their policy into different types of investments such as mutual funds. Also, there will be no guaranteed minimum cash value in this type of policy.

Survivorship Life Insurance Coverage

With a survivorship life insurance policy, there is more than one person that is covered.

These policies can be set up in a couple of different ways. One way is first to die. With this type of policy, the coverage is designed to pay out when the first person passes away.

There are also joint and survivor, or last to die life insurance policies. With these policies, the coverage pays out when the second person on the coverage passes away. These can either be term or permanent coverage.

Final Expense Life Insurance Coverage

Final expense life insurance coverage is often called burial insurance and is purchased by those who are considered “seniors,” or between the ages of 50 and 85 – although there are some insurance companies who will sell policies to applicants who are older.

This type of coverage is typically geared towards those who want to ensure that their loved ones will not be saddled with the high cost of a funeral and other related expenses such as a headstone, burial, flowers, and memorial service.

Final expense coverage can be either term or permanent – and oftentimes the underwriting requirements are not stringent. Also, the premium cost for this type of coverage is usually not high, even though the applicants are usually older.

No Exam Life Insurance Coverage

As its name implies, no exam life insurance coverage will not require that an applicant undergoes a medical examination as a part of the underwriting process. In many cases, when applying for life insurance, individuals must meet with a paramedical professional who will ask them in-depth health questions and will also take from them a blood and a urine sample.

Because of this, those who have certain types of adverse health conditions may be denied for the life insurance that they need. But, with no medical exam coverage, they could be approved for the coverage that they need – and, because there are no medical underwriting requirements to contend with, these policies are often approved within just a day or two after application.

While no medical exam life insurance is the best option for some, we do recommend that if you feel you could pass the medical exam, that you do try that so that you can achieve lower premium rates.

Key Man Life Insurance Coverage

Key man life insurance, or corporate-owned life insurance, protects a company in the event of the loss of an employee who plays a significant role in the business. 

Employees covered by this type of life insurance might include Executive Officers, specialized skill players, and highly effective members of the sales-force. 

Key man policies are unique in that the beneficiary and the policyholder are one in the same. The company simply informs the employee they will be purchasing a policy to insure them. With the employee’s signature in hand, they can purchase a policy.

Key man insurance can provide companies with a solid source of protection for their businesses.

Increasing and Decreasing Term Life Insurance Coverage

On some types of term life insurance, the death benefit will go down over time. These are known as decreasing term life insurance policies. (The premium, however, will usually remain the same). With a decreasing term policy, the policy ends when the death benefit reaches zero.

An individual may want to purchase a decreasing term life insurance policy to cover the balance of their unpaid mortgage. Each year, as the amount of the mortgage balance decreases, so does the amount of the insurance coverage – until eventually, both will end.

There are also term policies where the death benefit increases over time. Often, this benefit will be purchased as a cost of living rider on the policy. A young parent may consider this type of policy as their coverage needs increase.

Group Life Insurance

This type of life insurance is bought as part of a group, often through your employer or a union. Because it is bought in bulk, employers often secure low rates and may help cover some costs for the policies, making them an excellent deal.

Unfortunately, you’ll probably lose coverage if you leave the group (most often when you change jobs), so these policies work best as a supplement to existing life insurance that you control, rather than as a standalone policy.

Accidental Death and Dismemberment (AD&D) Insurance

AD&D insurance pays out if you die in an accident. The good news is you don’t always have to die to receive a payout. If you lose a limb or the use of one or both eyes, the insurer will give you a portion of the full payout—provided the loss is due to an accident, not an illness. The bad news is it won’t pay out if you die from anything other than an accident.

We offer a FREE Risk and Insurance Audit for new clients.

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