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08/27/2014

Life Insurance: Part of your financial plan.

Life Insurance is designed to protect your family's financial security in the event you die. It can also be use to protect business associates as well. Many use life insurance as the basis for their financial plan. For financial planning purposes it can serve many different functions as part of your overall investment strategy. Life insurance can help you build assets to meet needs during your lifetime. Certain types of life insurance offer living benefits to the owner such as the potential of tax-deferred growth of cash values and tax-favored access to cash value.

Two types of insurance are Term Insurance and Permanent Insurance:

  • Term Insurance is similar to renting; a premium is paid and the insurance covers you for a limited time. This type of insurance does not build up cash value. The main advantage of term is that it is initially less expensive than permanent life insurance.
  • Permanent Insurance is similar to owning; three commonly used types of permanent insurance are Whole Life, Universal Life and Variable Universal Life. Each provides for the build up of cash values and riders may be available for additional benefits and features.

Which type you choose will depend on your specific financial situation and goals. Working with a planner that can bring-in insurance specialists who work to design insurance solutions that have the right benefits and features is important. The involvement of estate planning attorney's and accountants may also be necessary in order to make sure the ownership structure is appropriate while minimizing potential tax issues.