Life insurance is a contract between an insurer or an insurer and an individual insured individual. The insurer agrees to pay out a specified amount of money upon the insured person’s death to an individual or institution that the latter refers to as the beneficiary. Depending on the agreement, beneficiaries can be anyone, including relatives and friends, or just a group of individuals which the former chooses. In some cases, Best Term Life Insurance can be used to replace a standard income. This way, family members who may have lost their sources of income due to job loss, education, short-term disability, and others can continue to live at the same standard of living they had before the insured’s demise.
Insurance provides benefits to the named beneficiaries only upon the insured’s death. The insurance contract term may be up to 60 years, depending on the kind of contract entered into and the details stated in the policy. In addition to the named beneficiaries, the insured may name one or more secondary beneficiaries. These are typically family members whom the insured considers near and dear, like a brother or sister, or people with similar professions or incomes who are not immediately connected to beneficiaries.
In terms of investments, the benefits accrued by the insured may be either tax-exempt or tax-free. There are basically two types of life insurance policies-the term and the permanent life policies. In the term life insurance policy, coverage lasts only for a fixed number of years. One may choose to accumulate cash value or universal life insurance options in order to provide beneficiaries with additional income while the insured person is still alive. The remaining balance of the premium is paid by the insured when death benefits are paid, thereby providing the beneficiaries with the opportunity to purchase a tax-free life insurance policy or a tax deferred lump sum when the insured dies.
Permanent life insurance quotes are a bit more detailed than term life insurance quotes. Benefits are paid to the named beneficiaries in equal amounts throughout the policy period. In the case of permanent life insurance policies, the insured may choose to invest the money accumulated within the policy in an interest bearing account, as long as the account is registered with the appropriate government agencies. Most people opt for whole life insurance quotes in order to ensure that their families are able to carry out their daily and necessary expenses post-emancipation. They can also borrow against the policy’s accumulated cash value if they need additional funding.
Both term and whole life insurance policies can be invested. In the case of whole life insurance policies, gains and losses are treated similarly to any other taxable income. Interest earned on accumulated cash value life insurance policies is tax-free. However, tax deferment does not apply to interest on cash value policies that are paid within the first two years from the date of purchase. A combination of term life insurance policies and universal life policies can provide cash value building for a beneficiary or relatives, but will result in higher premiums than a pure term life insurance policy.
Universal life insurance coverage combines elements of both permanent and term insurance policies, with one affordable premium payment and no investment choices. Premiums are based on your age, health conditions, occupation, and the amount of coverage you want. Policy holders may switch health conditions and employments at any time.
Any death that occurs within the first year from the purchase of a permanent life insurance policy will free up the cash surrender value. Any death occurring after this time will surrender the policy and its cash value. Policy holders can make monthly premium payments that are tied to their income. Policy premiums are not refundable, but policyholders pay into the account and keep growing tax-free. Policy holders may borrow against the cash value of a permanent life insurance policy, up to the policy’s full face value. Policy holders should also realize that many permanent policies have a “cash surrender” date, which is the date when the policy becomes worthless and surrendering it results.
Universal life policies are considered “tax deferred”, because premiums are never paid until the holder passes away, or until the policyholder begins to attain the minimum age for retirement. The policyholders do not start paying taxes on interest or dividends until they begin to receive them. Universal policies have several advantages over level premium term policies. They allow policyholders to build cash value even while they are living, and they allow policyholders to enjoy a guaranteed level premium for the life of the policy, along with: