Life vs. Health Insurance
Life Insurance- The Living Benefits that can help if you want to use it to buy a house or car
The two primary types of life insurance coverage are term life insurance and permanent life insurance. Term life insurance is a more cost-efficient way to get a given dollar amount of protection. However, a term life policy (and its payout) only lasts for a limited time – typically 10 to 30 years – and does not build cash value. Once the policy’s term runs out, there’s no protection and no value left.
Permanent life insurance, on the other hand, lasts your entire life as long as premiums are kept up.1 These policies also provide other benefits, including cash value that can be used while you are still alive.2 The two most popular types of permanent policies are whole life insurance and universal life insurance. Both provide lifelong insurance coverage and build cash value. However, the policies differ regarding flexibility, guarantees, and how life insurance companies calculate cash value growth.
A permanent life policy will typically offer most of the optional riders noted above, but it also has an important feature that term life does not provide: cash value. So while permanent insurance is typically more expensive than term, most of the cost difference is because premium dollars can contribute to a policy’s cash account, where it grows tax-deferred, helping your family build wealth.
Cash value usually takes a few years to grow into a usable sum, but once that happens, it can become a financial asset with many advantages. Generally speaking, there are four ways to access life insurance cash value:
Indexed Universal Life Insurance Policies: The Perfect Option for Professionals and Business Owners
For a professional such as a doctor, attorney or CPA, the Indexed Universal Life policy is perfect for your retirement needs. Often as a professional, you operate as a P.A. being taxed as a sole proprietor, an S Corporation or a C Corporation, and under the tax codes you are limited to retirement account choices. The SEP IRA, Solo-401k or the UNI-401k, all allow you to save on a tax-deferred basis; but the maximum contribution limit is still the same $49,000.00.
Now let’s explore the IUL (indexed universal life) and why it is a better choice. As a professional of these types, your income level is much higher than average, so you max out your contribution very early in the year. With the IUL, there is no limit on how much money you can contribute—the money still grows tax-deferred, but with a several advantages.
Now comes the great part! In the event of a business need, the money in your tax-deferred accumulation account can be used, through interest-free loans, for the purchase of new equipment, to expand the practice, or just to carry you through a tough time. At retirement the money is paid to you in the form of tax-free loans against your account value. The income would be a lifetime income with of loss in a down market, and at the end of the income, your death, the face amount of the life insurance policy would still go to your heirs as a tax-free death benefit. The tax-free death benefit would, at any time, be the security to your family that their lifestyle would continue in the same manner to which they had become accustomed—a **guarantee the retirement account cannot promise. If, through a consultation with your insurance professional, it is determined that your life insurance needs exceed the desired amount of contribution in the IUL, a term life insurance policy can be added to meet your life insurance needs at a lower cost.