Purchasing a life insurance policy is a way to protect your loved ones with financial support after you die. Life insurance payouts are tax-free and can be used however your family wishes. Many people use the cash payout to cover final expenses, help their spouse cover mortgage payments or everyday bills, or fund their children and grandchildren’s college education.
One essential benefit of life insurance is peace of mind, knowing that your family is financially protected. There are several decisions when it comes to life insurance. To get the best policy for your situation, you must talk to an educated agent who can explain all the options. Amana Insurance Agency will sit down and work one-on-one with you to answer all your questions and get the coverage you need.
Term
A term life insurance policy is the simplest, purest form of life insurance: You pay a premium for a determined length of time, typically between 10 and 30 years, and if you die during that time, a guaranteed death benefit of cash is paid to your family (or anyone else you name as your beneficiary). Term life can be more affordable than whole or universal life policies since there is no cash value generated.
Whole Life
A whole life policy can serve as emergency funds for you if something goes wrong, or you may be able to withdraw funds or take out a loan against the policy. That’s because a portion of each premium payment you make is funneled into a savings component of the policy called the cash value. Premiums remain fixed, regardless of market conditions, and your death benefit is guaranteed as long as premium payments are made.
Universal Life
Universal life insurance is a type of permanent life insurance. With a universal life policy, the insured person is covered for life as long as they pay premiums and fulfill any other policy requirements to maintain coverage. Like many permanent life policies, universal life insurance combines a savings component (cash value) that earns interest in line with current money market rates. When you pass away, the policy’s death benefit is paid out to your beneficiaries. If your scenario changes over time, you can withdraw money or borrow against the policy’s cash value and adjust premiums/death benefits to suit your needs.
Indexed Universal Life
Indexed universal life (IUL) insurance is a type of universal life insurance tied to the performance of a market index, like the S&P 500, rather than a fixed interest rate. Unlike traditional index investing, your IUL account’s principal is guaranteed, insuring it against market dips. Depending on your policy and available cash, you can borrow money from your IUL without facing penalties, taxes, or a credit check. You also will not have to pay back the money you take out.
While the return potential for an indexed universal life policy can be higher than whole life insurance, returns aren’t unlimited. Insurance companies can impose a cap rate or ceiling on your annual returns.
Funeral Expense Policy or Irrevocable Burial Trust
Burial insurance is a whole life insurance policy with a death benefit typically ranging from $5,000 to $25,000. This insurance policy is designed to relieve stress on your loved ones by covering your funeral and burial costs. The policy is also protected from Medicaid spending in a nursing home situation. Most funeral homes require total payment upfront, and it can take several months for your survivors to receive money set aside in your will. Burial insurance helps fill the gap by providing funds to the funeral home first, and leftover money is paid out to the insured’s estate.