Purchasing life insurance is often the first investment head of households make, but according to Richard Blair, Executive Director of Wealth Solutions, you many not select the right type. Of all the estate planning tools available, life insurance is the most flexible. Not only does it replace a financial loss resulting from death, but there are several advantages to buying a life insurance policy. “It can help with settlement purposes, and it can also be an opportunity to save for tax-deferred capital,” says Blair. Life insurance offers secure liquidity, and individuals can consider the key principal types.
1. Term Insurance. This insurance is temporary for a given period, such as 10, 15, or 30 years. You pay a fixed premium for its term, and if there’s no death during that period, you’ll get a renewal option. The premium typically rises, but term insurance requires the least amount of cash payments. It’s cheap insurance for a useful solution.
2. Whole Life Insurance. Generally, this insurance is divided into two parts: life risk protection and investment. The protection represents insurance to cover you in case of death. The investment represents your savings account in the policy, and creates a cash value. During the initial years after opening this type of policy, your premium goes toward fees, and over time the cash value increases, thus a larger share of the premium is added to the cash value.
3. Variable Universal Survivorship Life. This is a hybrid protection policy, packaged with stock investments that provide control and flexibility and tax advantages, and geared towards couples. The advantages include, insuring two lives, pays benefits upon second death, and builds cash value. It also offers flexible premium payments. Now, the market value will often fluctuate with market conditions.
How much life insurance and what kind of policy you purchase can be perplexing for most people, but it all comes down to your needs. The only realistic way to arrive at how much life insurance you’ll require is to assess that question in terms of what your dependents will require. The amount and kind of insurance you select should be sufficient to cover any deficiencies.
Providing Effective Financial Planning
Registered and certified financial planner, Richard Blair is the Executive Director of Wealth Solutions. For over 23 years, Blair has advised clients in designing the necessary documents to plan their future. Blair’ experience includes well thought out approaches to building a nest egg, while keeping tax benefits in mind. His philosophy stems from the basic tenets of proper asset allocation and diversification, and his diverse financial knowledge continues to be invaluable to his clients.
Learn more about Richard Blair