Life Insurance

 

Life insurance is a core component of most families financial plans. It provides a degree of security against the certainty of death and can help survivors achieve specific financial objectives.

Optimized Benefits’s Life Insurance division is dedicated to helping you with all of your life insurance needs. We provide access to a nationwide network of life insurance companies and can supply you with product quotes for:

  • Term insurance
  • Whole life insurance
  • Universal life insurance
  • Variable Universal Life insurance

Why buy life insurance?

Life insurance has many uses for both individuals and businesses. It can:

  • provide security for your family
  • protect your home mortgage
  • take care of your estate planning needs
  • receive tax free income at retirement
  • look at other retirement savings/income vehicles

Life insurance benefits are usually tax-free and can be used to complete a retirement plan, generate lifetime income, pay off a mortgage, and provide funds for childcare, college education and more. Policies that accumulate cash value can often provide tax-advantaged money to help meet certain needs.

Types of life insurance

Term Life Insurance

Term Life Insurance is essentially budget-based coverage for a specific “term” of time. If the need for life insurance is limited to a specific period of time or if the need is large and the ability to pay is relatively low term insurance may be the appropriate solution.

Term Life Insurance

  • Provides protection for a specific term (typically 5,10,15,20 and 30 years)
  • Produces a death benefit that is generally tax-free
  • Can be converted to a permanent policy without evidence of insurability
  • Usually cost less than permanent insurance in the short-term
  • Two types of term life insurance are Adjustable Renewable Term (ART) and Level Premium Term
  • ART – life insurance has premiums that are initially low; however, the premiums increase substantially as the insured gets older. These plans have diminished in popularity due to the introduction of level premium term life insurance
  • Level premium term life insurance has premiums, which remain level over a specified period of time. These plans have premiums that remain level for a period of contract.

Permanent Life Insurance

Permanent Life Insurance provides long-term coverage plus growing cash value, and may be an appropriate solution for someone seeking long-term financial protection.

Permanent Life Insurance

  • Provides protection for a Life-time (as long as premiums are paid)
  • Produces a death benefits that is generally tax-free
  • Creates a tax-deferred “cash value” that you may access in a tax advantage manner when needed through loans
  • Cash values can be converted to an annuity to provide an income stream you can not out live
  • Often includes guarantees that premium will remain level and death benefit will not decrease

Whole Life Insurance

Whole life insurance is permanent life insurance and provides protection for life. As long as premiums are paid, a death benefit is paid to the beneficiary. The premiums for whole life insurance policies are designed to remain level over time usually until age 100.

In addition, these policies accumulate cash values on a tax-deferred basis. The rate of return on whole life insurance cash values is dependent upon a number of factors including the results of an insurance company’s investment performance. Cash values can be used for a variety of options:

  • The policy can be surrendered at anytime for the cash surrender value.
  • The policy owner can take out a loan and use the cash value as collateral.
  • The cash values may be used to pay premiums for a certain period of time.
  • The cash surrender value can be used for retirement income.

Universal Life Insurance

Universal life insurance is another permanent life insurance policy that delivers flexible premiums and death benefits. Usually it includes a cash value account that accumulates at a floating interest rate, with a minimum interest guarantee.

  • The cash value may then be used to pay for the cost of insurance
  • Riders and other policy expenses

As long as premiums are paid, a death benefit is paid to the beneficiary. These policies are different from whole life insurance policies because they offer the policy owner some flexibility to change the premium payments and death benefit.

The death benefit may be increased subject to insurability or decreased, and the premiums can be increased and decreased as well as skipped. Universal life insurance policies may be purchased with one of two different death benefit options.

  • One is a level death benefit and the second is an increasing death benefit. The policy can be surrendered at anytime for the cash surrender value.
  • The policy owner can take out a loan and use the cash value as collateral.
  • The cash values may be used to pay premiums for a certain period of time.
  • The cash surrender value can be used for retirement income.

Variable Universal Life Insurance

Variable universal life insurance is also a permanent life insurance policy which combines the flexibility of Universal Life and the performance of investment accounts. Very often these polices are used to supplement retirement or deferred compensation.

Since these polices are performance based they may outperform or under-perform a Whole Life or Universal Life policy.

Variable universal life insurance policies may be purchased with one of two different death benefit options:

  1. A level death benefit
  2. An increasing death benefit

Policies accumulate cash values on a tax-deferred basis with the potential for higher rates of return than traditional whole life policies.

The cash values of variable universal life insurance policies vary with the investment results of funds chosen by the policy owner. These polices are often used for a variety of options:

  • To provide tax-free income at retirement
  • The policy can be surrendered at anytime for the cash surrender value
  • The policy owner can take out a loan and use the cash value as collateral.
  • The cash values may be used to pay premiums for a certain period of time.

Life Insurance as an investment

The primary purpose of a life insurance policy is its death benefit and no life insurance product should be purchased solely as an investment, however variable universal life insurance offers a unique advantage for accumulating money within the policy:

  • Values in a separate account grow tax deferred
  • Values can be transferred among accounts without triggering a tax event
  • Investment funding can be dollar cost averaged
  • Automatic asset reallocation, if available based on your personal risk tolerance
  • May be able to diversify investments among asset classes and investment styles
  • May be able to provide tax-free income for retirement

Analyzing your life insurance needs

Duration of Need
Less than 10 years More than 10 years
<3 years 3 – 9 years
Annual Renewable Term 10 to 20 year Term
High Risk Tolerance Medium Risk Tolerance Low Risk Tolerance
High Premium Variable Universal Life Variable Universal Life Universal Life
Medium Premium Universal Life Universal Life Universal Life with Death Benefit Guarantee
Low Premium Term convert to Permanent at later date Universal Life Minimum Premium Or Combination of Term and Permanent

Contact us for more information!

About Optimized Benefits

Optimized Benefits is a Boutique Firm dedicated to providing smart solutions to the small and mid-sized business owners and their Employee Benefits plans
we have a focus on Retirement (401K) and Group Health plans

Contact Us

55 W Wacker Dr 14th Floor
Chicago IL 60601

312 263 1590 X 101

Gene@optbenefits.com

Check out the background of this investment professional on FINRA’s BrokerCheck: http://brokercheck.FINRA.org