Buying life insurance may be one of the most important purchases you’ll ever make. We all have a responsibility to protect those who depend on us with a sufficient amount of life insurance protection. It can provide those who are left behind with a lifetime of financial security.
Life insurance is a contract between an insurance company (the insurer) and you (the insured). In its most basic form, a life insurance contract is a promise by the insurer to pay a sum of money to a person you choose (the beneficiary) upon your death. In return, you pay premiums to the insurer.
If someone depends on you financially, chances are you need life insurance. However, life insurance can play an important role in your overall financial strategy. Depending on your needs, you may purchase life insurance to provide:
The proceeds from your life insurance policy pass to your beneficiaries free of federal or state income taxes. Although, in certain instances the proceeds may be subject to estate taxes. Contact an estate planning professional or your tax advisor for more information.
There are two basic types of insurance—term and permanent. In addition, there are variations on these two basic types.
Term life insurance is generally the least expensive and least complicated type of life insurance. It provides insurance protection at a low cost for a specified period of time, such as one, 10 or 20 years. If you die within the term period, a death benefit is paid to your beneficiary. If you are still living at the end of the term, protection ceases unless the policy is renewed. There is no "accumulation" element or cash value with term insurance.
While term insurance provides protection only for a limited time, permanent insurance can provide protection for your lifetime, or up to a specific age—at which point the insurer will pay the policy owner the cash value. In addition, permanent life insurance policies can build cash value that you can borrow against and, in some instances, withdraw to help meet future goals such as paying for a child’s college education. You will usually have to wait a period of time after the purchase of your policy to accumulate sufficient cash value to borrow against.
Permanent life insurance policies enjoy favorable tax treatment. Cash value generally grows on a tax-deferred basis, meaning that you pay no taxes on earnings in the policy while it remains in force. Policy loans generally are not considered taxable income, and withdrawals generally can be taken up to the amount of premiums paid without being taxed.
The two general types of permanent life insurance policies are Whole Life and Universal Life.
Golden 1 Financial Consultants1 are experienced in helping you determine what your long-term investment objectives may be, what your level of risk tolerance is, and what types of investments are most appropriate to potentially help you achieve your goals. Take the time to discuss your goals with your financial consultant to help you make the right decisions for your individual financial needs. Ask a Golden 1 Financial Consultant how they can help you:
Schedule a free consultation with a Golden 1 Financial Consultant by calling 1-877-GOLDEN 1, ext. 2780 (1-877-465-3361, ext. 2780).
1 The Financial Consultants of Golden 1 Investment Services are registered representatives with LPL Financial. Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates. LPL Financial is a Registered Investment Advisor. LPL Financial is not affiliated with Golden 1 Credit Union nor Golden 1 Investment Services.
The LPL Financial registered representative associated with this site may discuss and/or transact securities business with residents of all 50 states.
2 You are advised to seek advice from your own tax professional and attorney.
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