September is Life Insurance Awareness month and we’re taking time to review three common types of insurance and how you can benefit from them. When deciding to purchase insurance, ask yourself what do I need it to do? Is it going to be used for yourself or to help others when you pass away? These are important questions as they will help guide your decision on the best insurance option for your circumstance.
Term Life provides the lowest cost but it is only utilized when you pass away. This type of insurance is granted to people based on a simple questionnaire or given through a group rate. Term Life is common when getting it through your employer.
Long Term Care (LTC) is moderately expensive and can only be utilized when you are unable to perform activities of daily living. Most LTC is a use it or lose it type of insurance. Meaning the unused value of the policy doesn’t pass to your heirs. I usually recommend finding insurance that offers a cash value payout to your dependents or one serves a dual purpose.
Universal Life is the most expensive but allows you to utilize the cash value of the insurance and depending on how you structure the distribution it has the potential to be tax-free. These accounts are best for people who are trying to put more money away and avoid ongoing taxation. There are two types of universal insurance: variable and fixed. Variable options are tied to market performance and have the opportunity for loss. Fixed options are tied to either a fixed percent or, in some cases, a crediting strategy. These are both options but will not be exposed to loss as is the case with variable insurance.
We’ve outlined some basic information about three different types of life insurance but it’s always important to dig deeper and learn more about your options. Sometimes it helps to reach out to a financial professional and discuss what’s the right fit for you. If you are confused or intrigued by how insurance could be a part of your portfolio, set up an appointment with KJ Dykema, MRFC® and we’ll review what is the best way to move forward with your financial plan.