“Now that we have determined how much life insurance you ...



The problem most life produces have is trying to determine which product is best suited to meet their client’s needs. Actually the best course of action once you have determined the need is to give your client all the details, favorable and unfavorable, and let them decide which type of product better fits their current situation.

“Now that we’ve determined how much life insurance you need, let’s talk about the different types of life insurance. First you have term or temporary insurance, which is life insurance that covers you for a certain period of time, usually 10, 20, or 30 years. The benefits of term insurance are that in most cases it is an income tax-free death benefit so you can pass money to your beneficiary and they won’t have to worry about any income tax consequence. In fact, life insurance in one of the few vehicles in which you can pass money on with out paying taxes. Depending on your age, term insurance is usually easier on your cash flow making it more convenient to purchase. Term insurance also has a conversion privilege that allows you to convert all or a portion of the face amount to permanent insurance within the conversion period of the policy, which varies depending on the length of the term you choose. However, term insurance is strictly a death benefit and does not accumulate any cash value. Therefore, the cost in the long run is more expensive because if you don’t use it then you get nothing back in return for the premium you paid.”

“The second type of life insurance is permanent insurance. Permanent insurance usually provides an income tax-free death. Permanent insurance also provides a lifetime death benefit and you usually pay level premiums for life as well. Permanent insurance also accumulates cash value, which grows tax deferred over the life of the policy. You even have the ability take income tax-free withdrawals and loans at some point if you like. Permanent insurance usually costs more money to start, but over time becomes less expensive because of the cash value accumulation and the level premium. At some point the accumulated cash value will cross the break-even point, which means that your accumulated cash value will be greater than the sum of all premiums that you have paid.”

“Which do you think fits your situation?”

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Term vs. Perm

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