Why Life Insurance?
Life insurance is more than just a death benefit that protects your family if you die too prematurely. Today’s policies are designed to:
- protect your estate by providing financial liquidity
- protect against long term care costs with living benefits
- help build tax-deferred wealth for retirement
Permanent life insurance offers an incredible 3-for-1 special. With every dollar of premium, you are buying a death benefit, building living benefits and creating wealth through tax-deferred savings.
Different Types Of Life Insurance
- Term – Insurance that is designed to pay only a death benefit. There is no cash value build up and the insurance coverage only last for the duration of the term or period chosen. Premiums usually increase yearly.
- Permanent – Insurance that pays both a death benefit and builds a tax-deferred cash value in the account. This insurance is permanent with steady level premiums.
- Whole Life – The most conservative type of whole life policy. These policies offer tax-deferred growth, living benefit options, and death benefit with set premiums for as long as you own the policy.
- Universal – This type of permanent policy allows you to change both the death benefit and premium during the policy. This is appealing to some who need more insurance early or want to increase their savings within the policy later. Additionally, if times are tight you can reduce your premium allowing the cash value within the policy to pay premiums.
- Index Universal – This type of permanent policy is based on the Universal Life concept with the exception that the cash value account is linked to a market index for growth. Your cash is not directly invested in the market but you get the benefit of market appreciation with no risk of losing principal due to a down market.
- Variable Universal – This type of permanent policy directly invest your cash into the market (usually through mutual funds). You have the opportunity for larger returns but also have full exposure for loss of principal if the markets go down.
Roth IRA or Life Insurance?
Let's compare and you decide...!
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One of the reasons to consider permanent life insurance vs. a Roth IRA is the $6,000 IRA Roth contribution limit. You can contribute more funds to an insurance policy (based on need) and potentially create a larger retirement nest egg over time.
Life insurance “Living Benefits” (e.g Accelerated Benefit Riders) are optional typically no-cost riders offered on most newer policies. This benefit allows you to access the death benefit while you are still living for chronic or terminal illness care. You do not have to die to use your insurance policy!
Living Benefits are not the same as long term care insurance and are not marketed as such. Many people find that having Living Benefits as an option in case of illness or sickness gives peace of mind their medical bills can be paid and their retirement assets will not be depleted.
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