Chances are if you had the choice between researching life insurance options and getting a cavity filled, you’d probably be on the phone with the dentist. We get it: life insurance isn’t exactly a sexy topic, and it seems like a complicated product of dubious merit. Images spring to mind of pushy sales guys barking things like “Term!” or “Universal!”
Truth be told, life insurance is not only less complicated than you might think, it’s far more important than you might imagine. Because every single person on this planet will die one day, it’s a verifiable fact that your loved ones will, eventually, be without you. And, while you cannot avoid the inevitable end of life, you can make sure that those who survive you will be well taken care of financially.
In this post, Freedom Insurance Company’s Principal Agent, Mark Wurster shares his expertise and insight on policy options, financial implications, and more. If you’ve ever wanted help unraveling the mystery of life (insurance), then read on!
What are the basic life insurance policy types, and how do you help your clients choose the right one for their needs?
There are many different types of life insurance products but they all fall into two basic types: permanent and term. Permanent life insurance (sometimes called whole life insurance) develops a value over time and does not have a set expiration. Term insurance is purchased for a specific time period and generally develops no value.
To determine our client’s life insurance needs, we work with them to complete a Life Needs Analysis. This tool allows us to collaboratively assist the client in determining their current and long-term life insurance needs.
For more information on life insurance products, we suggest giving us a call or visiting the Maryland Insurance Administration’s page.
Are there ways to use a life insurance policy as an investment vehicle?
Life insurance is not an investment vehicle. It does, however, have some investment-like features. For example, whole life policies have the ability to provide a return to the policyholder and allow funds to grow tax deferred. Death benefits flow tax fee to the beneficiaries.
Do life insurance policies only pay out upon death?
If you have a whole life policy (permanent) you may have the ability to take cash value withdraws. If the policyholder becomes terminally ill, some policies will advance a portion of the death benefit to the policyholder to cover their expenses.
What are the tax implications of distributions from a life insurance policy?
Life insurance death benefits always flow tax free to the policy beneficiaries.
How does a person’s physical health affect the kind of policy they can get? Do changes in health over the course of a policy have an effect on premiums?
A person’s health and family history impact the rate class of the individual at the time they apply for a policy. Once the policy is issued, however, changes in health do not impact the coverage or rates during the policy. That’s why it’s always good to purchase your life insurance when you are young since the rate in most cases will not increase as you get older. It is important to remember that there are many variations in life insurance products–some may not offer these guarantees and it is reflected in a lower premium. It helps to always understand what’s driving a low premium.
Can someone just buy a policy on the Internet, or does it make more sense to work directly with an agent?
It is possible to purchase life insurance over the Internet—or by mail—but because of the many product variations it is best to speak with a life insurance professional who can assist you in purchasing the best product for your needs. There is no additional cost associated with a policy purchase through an agent.
Where would you send a client for more information about life insurance coverage?
We’re happy to hear from clients or prospective clients, so a call to the office is always an option for more information. For those who’d like to explore the topic on their own, we find the Maryland State Insurance website is an excellent source of information not only for life insurance but also for auto, home, business and health insurance.