Life Insurance Lesson...

[Jodi]

Okay, so we've been discussing doing a Spc. Needs Trust for a LOOOONG time now. We will get to it.

Without talking to a salesman, can any of you shed some light on the difference in policies and amounts?

Just curious.

Thanks a bunch! ;D

Jodi

[CC]

Jodi ~

Hope this helps explain some of the differences...

Types of Life Insurance


There are two basic types of life insurance:

Term Life Insurance covers you for a period of time—or term—that you choose. Permanent Life Insurance offers a few more variations, and provides a lifetime of coverage. Each has benefits that may be important to you depending on the ifs in your life.


Term Life Insurance

Term life insurance is the least expensive type of coverage, at least initially, and the simplest. Coverage is in effect for a fixed term or period of time—typically 1 to 30 years—and usually can be renewed. The policy pays your beneficiary a fixed amount of money if you die during the term of the policy. The premiums are lowest when you are young and generally increase upon renewal as you age. These policies do not build up a cash value. More >

Permanent Life Insurance
Whole Life, Universal Life and Variable Universal Life

Whole Life Insurance
Whole Life insurance provides protection as well as a cash value. Your premiums remain at a fixed level for the duration of the contract. Over time, the policy builds up cash value on a tax-deferred basis. It may also provide for dividends (which are not guaranteed), that can be used to add more coverage, can build a cash-value that you can use to supplement your retirement income or help provide for a child's education—it's your money to use as you need.1 But keep in mind life insurance should not be purchased solely for cash-value accumulation; its primary purpose is protection. More >

Universal Life Insurance
Universal Life Insurance is a flexible life insurance plan. These policies are interest-sensitive and permit you to adjust the death benefit and/or premium payments, within limits, to fit your situation. Your net premium payments are applied to the accumulation fund, which earns interest. The monthly cost of the death benefit and policy administration is deducted from the accumulation fund. As with Whole Life Insurance, the cash value is yours — you may withdraw it or borrow against it at any time.1 Or, you can use your cash value to pay premiums. Universal life rates are subject to change, but the rate will never fall below the minimum rate guaranteed in the contract. More >

Variable Universal Life Insurance
Variable Universal Life Insurance may be for you if you want to invest the cash value of your life insurance policy in various funding options that in turn invest in such things as stocks and bonds. You decide how your net policy values are to be invested—and you bear the investment risk. If market performance is poor, your death benefit may decrease, and you may have to pay higher premiums to keep the policy in effect. But your cash value also has the potential to grow more rapidly than with other cash-value policies if the market performs well. Like Universal Life Insurance, above, premiums and death benefits are adjustable within limits. More >


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Variable Life Insurance is offered by prospectus only. The prospectus contains information about the product's features, risks, charges and expenses, and the investment objectives, risks and policies of the underlying portfolios, as well as other information about the underlying funding choices. Read the prospectus and consider this information carefully before you invest. Product availability and features may vary by state. All product guarantees are based on the claims-paying ability of the issuing insurance company.

The amounts allocated to the variable investment options of your account balance are subject to market fluctuations so that, when withdrawn or surrendered it may be worth more or less than its original value.

Not pushing any particular life insurance company but I do believe Met Life site has some good info. The above was taken from one of their sites.

CC

[laurasnowbird]

Jodi,

Bleah, insurance. I'm licensed in health insurance, life insurance and accident insurance in Michigan and a few other states.

The stuff CC posted was good, and gives you the basics.

To protect your whole family, it's nice to have a mix of both term life and whole life insurance. You buy a large amount of term for the earlieryears of your life, when you have the biggest bills - the mortgage and children to raise. If you're in your thirties, buy a 20 or 30 year term policy.

Term life insurance is cheap when you're young. It's age BANDED, meaning that every five years, your premium (for the same amount of insurance) goes up. For instance, let's say you had a $10,000 term life insurance policy. When you were in your early 20's, that premium might be $2.50 per month. Next age band is 25-29, and your premium goes up. Then 30-34, and the premium goes up again. If you want a policy to fund a trust, this is NOT the one. By the time you are 70, that same $10,000 will cost you $70.00 or more per month. Makes sense? Most people who have term life insurance policies don't renew them at the end of the term because the premium is way too high for what you get.

A whole life policy is sometimes referred to as a level premium policy. These policies are age-rated also, but only once, and it is your age at inception of the policy. So the premium that you pay for your policy never changes, and you can keep it for as long as you pay the premiums. You could take out a $100,000 whole life policy at age 35, your premiums would be rated for age 35, and they would never change. You can arrange it so the insurance pays to the trust for the benefit of your child.

Met also has a "second to die" policy that is especially good for funding a trust. It assumes that while either you or your spouse are living, you would care for your child, but when the second person of the marriage dies, the policy pays out.

This is probably as clear as mud now, huh?

[samanthajosmom_12]

i have term insurance and it is locked in for the premium for 20 yrs. then after that who knows. sue

[Jodi]

CC - MetLife website, gee that was a tough one. Sometimes I think my brain leaves me. I'm on the internet all the time and you think I would have thought of Met. Thanks.

Laura - Mud!!! YES!!! Actually, you uncomplicated things a bit more for me.

Sue - you are waaaay ahead of me in the game. Good for you!

Thanks!!

[mommygwen]

One thing that got us to finially get the isurance was learning about age banding.
As you approach a benchmark birthday(25, 30, ,35 or 40), there is a push to get insurance before the jump up in cost.

Gwen