Howard N. Bienenfeld CLU, CHFC
Managing Partner, Bienenfeld, Lasek & Starr LLC
Craig Novek CFP
Financial Professional, Bienenfeld, Lasek & Starr LLC
Most of us plan to buy life insurance.
The question is what type of life insurance to buy and when is the best time to buy it? Often the decision is initiated when our life and livelihood impact others, like when we get married or have our first child.
With so many life insurance products on the market, the decision can be an overwhelming one.
So here is our guide to choosing the life insurance that best meets your personal and financial needs:
Term life insurance can be tailored to your financial and personal needs.
Term Insurance is a time-dependent policy. As the simplest form of life insurance, it is designed to provide you with coverage should you die within a specific time frame. Ideal for those who want substantial coverage but may be on a more limited budget, policy holders like its’ generally lower cost relative to permanent insurance and how they can match the length of the policy to their specific needs. For example, if your goal is to make sure your children have sufficient funds to cover college and graduate school, you can calculate the amount the policy will need to cover and when it will need to end. The policy will terminate either when you die or when the term is up, whichever comes first. Most term policies are structured for a 10–30-year period.
Term life insurance is typically the most affordable life insurance.
Here are some limitations and options:
The Limitations: The biggest limitation is implicit in the word “term.”
When your term policy ends, you no longer have a life insurance policy in place.
Term insurance has no cash value component
The Options: Once the term ends, you have three options.
Let it go. The policy will automatically lapse if you don’t renew it.
Renew it. But be prepared to pay a higher premium which will probably increase annually and there may be a required medical exam
Convert it in the earlier years of the policy. If your policy has a convertible clause, you may be able to convert it before the term of the policy ends.
Term Life is basic vanilla. Whole Life is more complex.
Whole life insurance policies are a type of permanent life insurance. Unlike term insurance, whole life insurance is not bound by time. You can be a policy holder for your lifetime as long as the premiums are paid.
Whole life insurance offers the following features:
Permanent Protection: Whole life insurance offers permanent life insurance protection with a guaranteed cash value, assuming premiums are paid based on the schedule set forth by the insurance carrier.
Dividends: Though not guaranteed, a whole life policy provides an opportunity to possibly receive YEARLY dividends
Cash Value: A whole life insurance policy provides cash value that can be accessed while you are living. You can generally withdraw money from the cash value tax-free (up to your cost basis) to use at your discretion. The amount withdrawn will be deducted from the cash value and death benefit of the policy. If the withdrawal is chosen as a loan, you will have the option to repay it, which will restore the policy’s value as if the loan had never occurred. Access to a policy’s cash value will increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.
Premiums: Whole life policies are offered with a variety of premium durations; some policies can be paid with a single premium while others may require premiums for the lifetime of the insured.
The Other Options: Universal Life Insurance, Variable Life Insurance and Indexed Universal Life Insurance
While the premiums for whole life insurance are the most expensive and term life insurance is the least expensive, Universal Life Insurance (UL), Variable Life Insurance (VUL) and Indexed Universal Life (IUL), which are all permanent life insurances, fall in between.
Here are some relevant facts about UL, VUL and IUL to help you start your insurance decision-making process:
Premium Payments: Universal Life Insurance, Variable Universal Life Insurance and Indexed Universal Life Insurance policies are known for their flexibility and adjustable premium payments. It is important to understand the structure of the premiums. For example, charges are taken from the account value on a monthly basis and as long as there is enough account value to cover the charges, the policy will remain in force. There are also UL policies with secondary guarantees, that may allow policies to remain in force even if there isn’t enough value to cover the charges, provided certain conditions are met.
Investment and Cash value: The basic differences between UL, VUL and UL is where the money is invested and how the cash value accumulates. Universal Life Cash value is based on an interest rate set by the company with a guaranteed minimum. Variable Universal Life provides the ability to invest in the market through separate accounts. Indexed Universal Life policies are based on options on various market indexes.
Risk Tolerance: Risk tolerance and the importance the policy owner places on the cash value are important factors in choosing between Universal Life Insurance, Variable Universal Life Insurance and Indexed Universal Life Insurance policies.
Buying life insurance is not just about the premiums.
It’s an interesting phenomenon. Most of us do not hesitate to insure our cars or homes. But our most valuable asset is ourselves and our ability to earn an income and provide for our families’ need and wants.
The smartest farmer insures the goose that produces the golden egg NOT the golden egg.
Often, when purchasing a policy, we calculate what our family will need if we are no longer there to support them, the tangible things. However, we don’t consider the intangibles. The bottom line is our life value is a lot greater than whatever we cover by our life insurance death benefit.
Buying life insurance is not a one-and-done deal. Your needs will change with age, financial status and life stages.
Our holistic approach at BLS Wealth Management means we are recommending life insurance as a part of your overall financial plan. We understand your needs and wants, your family dynamics and your retirement timetable and our goal is to be there for each and every insurance policy you may need.
It takes a financial professional to see the larger picture. But there are other advantages to buying life insurance from us:
a. Reputation: Google the 10 best term life insurance companies and you will be overwhelmed by the choices. Our trusted insurance specialists can identify which companies offer the products that are most appropriate based on your needs.
b. Long Haul: The cheapest policy today may not be the best option for the future. Some insurance policies are better for the long haul. We can identify those for you.
c. Creative Combinations: A financial professional can put together combinations of term and permanent life insurances which are most appropriate for you and your family, because he/she knows you and your family.
d. Underwriting: Our financial professionals understand the nuances of insurance underwriting, which is often not clearly defined for the lay person. Understanding your medical history is key in directing the financial professionals to the appropriate carrier. The information you supply a life insurance company today may affect your ability to purchase an insurance policy in the future.
Life insurance helps you prepare for the unexpected and gives you peace of mind. Have questions about what type of policy to buy and when to buy it?
We are here to answer all your questions. Call us at 954.689.9484 or contact hbienenfeld@blsfinancial.com or cnovek@ blsfinancial.com
Dividends are determined annually, subject to change and not guaranteed. The decision to purchase life insurance should be based on long-term financial goals and the need for a death benefit. Life insurance is not an appropriate vehicle for short-term savings or short-term investment strategies. Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured. You should know that there may be little to no cash value available for loans in the policy’s early years. CRN202305-282609
