Life Insurance: An Important Part of a Financial Strategy

Life insurance has many uses. If a breadwinner dies, proceeds from a life insurance policy can fund a child’s college education, pay for child care or other services, and ensure that surviving members will maintain their current standard of living. It can also be part of a charitable giving strategy.

Consider the type of life insurance that would work well with your overall financial strategy.

Term Life

Term life provides death benefit coverage for a fixed period. Term life has no cash value, so when the term is over, the policy ends.

Whole/Permanent Life

A permanent life policy accumulates cash value at an interest rate that’s set when you purchase the policy. You pay a fixed premium based on the rate. You can borrow against the policy, but unpaid loans will reduce the death benefit.

Universal Life

Universal life is a form of permanent coverage. It offers flexibility with benefits and premiums. The cash value of the policy can be borrowed against or withdrawn.

Variable Life

The cash value of the policy can be invested to take advantage of rising equity markets in the hope of producing potentially greater returns. However, losses are also possible.

Charitable Giving and Taxes

Life insurance can be used to benefit a charity. You can donate a life insurance policy directly to a charity, name a charity as beneficiary of the policy, or set up a rider to pay a charity a percentage of the policy’s value. Proceeds can also provide liquidity to pay estate taxes on large estates. Consult your insurance professional about the many benefits of life insurance.

*Applications for life insurance are subject to underwriting. No insurance coverage exists unless the required premium is paid. Accessing cash values may reduce the death benefit and policy values, trigger tax consequences, surrender fees, and charges, and may require additional premium payments to maintain coverage. Guarantees are based on the claims-paying ability of the issuer.