Gaithersburg Life Insurance

Types of Life Insurance and common uses of these insurance products

Term Life Insurance

Will provide life insurance for a specified period of time. These policies provide benefits in the event of death, but they generate no “cash value”. If you have a limited amount to spend, and only need insurance for a finite period of time, you may be able to get more coverage by buying term insurance than by buying cash value insurance. Keep in mind that the cost of term insurance increases as you get older, which may make it more expensive than cash value insurance in the long run. Today’s term policies usually have two sets of premiums – guaranteed maximum premiums, and “current premiums”, which are usually much lower, but which can be changed by the company. The company cannot increase current premium above the guaranteed maximum premiums shown in the policy.

When you buy term insurance you need to make a choice as to how long you want the protection. You may renew the policy without a physical examination for the period of years specified in the policy. Some term insurance can be converted to cash value insurance up to a specified age with no physical examination. Premiums for the converted insurance will most likely be higher than the premiums you would be paying for the term insurance.

How much Life Insurance Do I need?

Some common Insurance guidelines are:

Whole Life Insurance

Whole Life Insurance is a form of permanent life insurance, whole life features guaranteed premiums, death benefits, and cash value. Whole Life Insurance polices also give you the potential to receive dividends, which can increase the value of the policy when the insured is living or provide an increased death benefit for your beneficiaries. Whole Life Insurance offers:

• Protection for Life
• Premium payments that stay the same each year
• The ability to add additional monies into the policy on a tax-favored basis
• Cash Value you can use while you are living
• Guaranteed level premiums
• Guaranteed death benefits
• Guaranteed cash value

Universal Life Insurance

With Universal Life Insurance, you gain financial protection should a premature death occur. Also in addition to this protection which is provided by the life insurance, your premium payments earn interest and help build cash value which is part of the policy. This growth of cash value gives you the choice to use these funds later in life. If you choose to use these funds to help pay tuition costs, or even help supplement your retirement income stream, the cash value is there for you to use.

Indexed Universal Life Insurance

Indexed Universal Life (IUL) is permanent life insurance that offers death benefit protection when death occurs. Like other forms of permanent life insurance, your premium payments may earn interest and grow the cash value of the policy. What differentiates IUL from other permanent policies is the way interest is credited. In addition to offering a declared interest rate, IUL offers the ability to earn interest that is linked to the movement of a specified stock market index over a specific time. The way is which interest is credited gives you the potential for strong cash value accumulation. IUL policies also offer protection in a poorly performing market. Most carriers will split your premium into two pre-selected accounts. The first is the Fixed Account, and the second called the Index Account. You, the policy holder can select which account your premiums go into. Most carriers will declare a fixed rate on the fixed account between 3-5% depending on the carrier. For the Index Account the carrier will set an Index Cap Rate and an Index Floor Rate. So think of your premium being split into two buckets. One bucket will grow at a Fixed Rate, and the other will grow depending on your selections and the carriers Index Cap and Floor Rate. Either way, IUL policies build cash value that can be accessed by Partial Withdrawals. Most partial withdrawals are generally tax-free. You can also access the cash value with low-interest policy loans.