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Different Types of Life Insurance Policies 2013 - Aaron Skloff, AIF, CFA, MBA - CEO Skloff Financial Group
Different Types ofLife Insurance Policieswww.skloff.com
Different Types of Life Insurance PoliciesThe life insurance industry has created a myriad ofsolutions for different needs.Whether life insurance is used to replace income, pay amortgage, pay for a college education or as an estateplanning vehicle, the type of policy implemented shouldbe customized to meet your needs and budget.www.skloff.com
Different Types of Life Insurance PoliciesThere are two basic categories of life insurance, term andpermanent.Term may be appropriate if you only need protection for alimited time, such as the life of a mortgage or the timeleading up to and the completion of a college education.Permanent may be appropriate if you need lifetimecoverage.www.skloff.com
Traditional Term Life InsuranceAs its name implies, Traditional Term life insurancecovers you for a specified term, with 10, 20 and 30 yearsbeing the most common.Premiums are fixed over the term of the policy.It provides the greatest amount of coverage for the lowestpremium.www.skloff.com
Return of Premium Term Life InsuranceAs its names implies, Return of Premium (ROP) Term lifeinsurance covers you for a specified term, but then returnsall of your premiums if you outlive the policy.Premiums are fixed over the term of the policy.It provides the second greatest amount of coverage for thesecond lowest premium.www.skloff.com
Guaranteed Universal Life InsuranceGuaranteed Universal Life is a type of permanent lifeinsurance that offers fixed premiums over your lifetime.Unlike most types of permanent life insurance, this type ofpolicy is not designed to build up cash value.It provides the third greatest amount of coverage for thethird lowest premium, but is the lowest priced permanentlife insurance.www.skloff.com
Variable Universal Life Permanent Life InsuranceVariable Universal Life (VUL) is a type of permanent lifeinsurance that offers flexible premiums based on howunderlying investments inside the policy perform.Unfortunately the investments inside the VUL can drop,decreasing the policy’s cash value and death benefit.www.skloff.com
Variable Universal Life Permanent Life InsuranceCombining something that is intended to be your safestfinancial instrument (life insurance) with riskyinvestments (stocks and bonds) can be a recipe fordisaster.It provides the second least amount of coverage for thesecond highest premium.www.skloff.com
Whole Life Permanent Life InsuranceWhole Life is a type of permanent life insurance that canoffer fixed premiums.As the insurance company generally charges more than theactual life insurance costs in the early years of the policy,cash value builds in this type of policy. The accumulatedcash value can be used to pay future premiums.It provides the least amount of coverage for the highestpremium.www.skloff.com
Estate Planning ConsiderationsLife insurance owned by an Irrevocable Life InsuranceTrust (ILIT) still provides for your beneficiaries, whilesimultaneously removing the policy proceeds (that wouldnormally be included in your estate and possibly subject tofederal and state estate taxes) from your estate.As you do not know the number of years you have to live,a term policy could wind up being too short lived.www.skloff.com
Estate Planning ConsiderationsImagine passing away a week after your term insurancepolicy expired.On the other hand, a permanent policy can insure yourgoals are protected – even if you live be over 100 yearsold.www.skloff.com
ConclusionsEstablishing life insurance immediately reduces the financial andpsychological burdens that can cause hardship when the need for theproceeds arrives.Establishing the right amount and right type of insurance allows you tocontrol what you want to protect in the most cost effective matter.Like most insurance, the earlier you start your policy the lower the costof the policy.Consult with a licensed insurance professional to gain an understandingof all your options.www.skloff.com