What Are The Different Types Of Life Insurance?
Life insurance is something that many people don’t prioritize until it’s almost too late. We get busy with the demands of adult life–career, jobs, family–and then something happens to make us question our longevity. It may be time to sign up for life insurance.
While most of us might think term life insurance is the best option, life insurance is something that should be thoroughly investigated to make sure you are getting the most bang for your buck. There are many options available, and spending some time to understand the differences between insurance types will help you choose wisely in this decision that will not only affect you, but your whole family. Here are some types of insurance, with the features of each:
The Two Main Types of Life Insurance: Term Vs. Permanent
We may be familiar with these types of life insurance, but there are several sub-sects within each category that offer different benefits to the policy owner. Before we cover the intricacies of these policies, let’s get an overview of term vs. permanent and what they mean for you:
Term Life Insurance
Term life insurance is considered the most basic type of life insurance policy, because it awards benefits only upon the death of the policyholder. There is no build up of cash value, and after the initial term that is agreed upon when the policy is created, the policy ends. Contract length can run anywhere from 15 to 30 years, with some of the better companies offering a 1-year renewable contract option beyond the initial term. The terms of the contract and the premiums stay the same for the life of the contract. This makes it difficult for the policyholder to request additional coverage when the initial term ends, as they would have to re-qualify for coverage at an older age, with possibly a more questionable health status. In some cases it is possible to convert a term life policy over to a more permanent form of coverage.
Permanent Life Insurance
Permanent life insurance is a policy that remains in effect as long as the policyholder is still alive, and it retains cash value and in some cases, even appreciates in value. While premiums may be a bit higher, there is additional security in realizing that this type of coverage will not, like term life insurance, eventually cease to exist.
The Different Types Of Permanent Coverage
Whole life coverage is the simplest form of permanent coverage, for it allows those who are budget conscious to stick to a premium that remains the same for the life of the policy. There are advantages to beginning a whole life contract at a young age, since lower premiums remain in effect as the policyholder continues to advance in age and possibly developing some adverse health conditions.
Universal life coverage has some of the same benefits of whole life; death benefits are guaranteed pending the death of the policyholder, and the policy steadily grows in value, providing additional security upon maturation. One additional benefit of universal and whole life policies is that they can be borrowed against to pay down debt, to refinance, or to make large purchases, although this is not a practice that most financial advisors would condone.
Variable coverage grows in ways similar to whole life and universal coverage, but the policyholder has the option of taking a portion of his account and investing it in equities that have the potential to grow much larger than a life insurance policy normally would. This could potentially make cash payout at the end of the policy much greater. If you an individual that would be okay with a certain amount of risk to acquire growth, this might be the policy for you.
Survivorship coverage exists for families where it is necessary to insure more than one person. This type of coverage is generally less expensive than holding two life insurance policies. Some policies pay out upon the death of the first family member, while others grow in cash value until the death of the last surviving policyholder. These types of policies are ideal for people looking to maximize their cash growth while minimizing their out-of-pocket costs.
Final expense coverage is typically purchased by seniors ages 50 and above who do not want the burden of their funeral and burial expenses taken on by their survivors. With the average cost of a funeral estimated at about $10,000 today, final expense coverage is a welcome benefit to families already experiencing grief and loss.
No medical exam coverage is a benefit to people with pre-existing conditions that may not be covered by an insurance provider. While this is beneficial to those people, the coverage comes with higher premiums and lower overall benefits than policies offered to people willing to undergo medical exams.
Thanks to the wide variety of options, almost everyone can get the life insurance coverage they need at a price they can afford. Ultimately you will need to determine the best choice for your needs, but knowing a bit more about what is out there will allow you to make an informed decision. There is tremendous peace of mind that comes with knowing you’ve made the right decision for you and your loved ones.
Top 3 Reasons Why Older Americans Are Selling Their Life Insurance for Cash
Americans have more choices than ever—about television shows, car services, or where to get their news, shop, and book travel. So it would follow that seniors seeking financial help during retirement should be informed about every viable option, including life settlements. This option, which can convert an unneeded life insurance policy into a windfall, is becoming better understood and more popular among the over-65 population. There are three primary reasons for this surge in life settlements:
Scarcity of retirement funding
Retirement funding is so vital that most young adults make decisions regarding their late-in-life income in their ‘20s or ‘30s, putting away money each month so that they can have stability during their golden years. Unfortunately, even those careful efforts often yield insufficient funds for the needs during retirement; one recent study showed that the number of Americans over 75 who filed for bankruptcy tripled from 1991 to 2016. More than 62 percent of the respondents in the study indicated that high medical costs were a key cause of the bankruptcy filing.
New tax laws
Several provisions in the March 2018 Tax Cuts and Jobs Act have made life settlements a more favorable option, including the doubling of the exemption for the estate tax (to $11.2 million per individual and $22.4 million per couple), the addition of a new tax credit for non-child dependents and the inclusion of premiums in the tax basis, which reduces tax rates on life settlements. The new tax code has allowed those who might not have previously qualified for a life settlement to reconsider their situation.
Better education about life settlements
According to research from the Insurance Studies Institute, more than 500,000 seniors lapse their life insurance policy annually, but ninety percent of seniors polled reported that they would have considered a life settlement if they had been made aware of the option. That statistic is likely to change, as life settlements gain a higher profile and financial advisors take seriously their fiduciary responsibility to make clients aware of the settlement opportunity.
Life settlements can convert an unprofitable life insurance policy into a valuable source of income for retirement, so seniors who might have had a change in circumstance in regard to their policy should investigate a life settlement. For a simple calculator that will allow you to assess your eligibility, visit Magna Life Settlements today.
Population Growth in Seniors Over 65 Indicates Progress in 3 Key Industries
According to data collected in 2012 by the U.S. Census Bureau, the sector of Americans over the age of 65 is expected to double by 2050, comprising about 20 percent of the nation’s population. This trend of aging baby boomers will affect demand in a number of industries geared toward seniors. Specifically, the graying of America is affecting life settlements, healthcare and caregiving.
What are the implications for advocates and professionals seeking to serve the growing needs of U.S. seniors?
Three key industries and the projections for how they will keep pace with surging demand
Every year more than 500,000 life insurance policies lapse, with the policy holder getting no financial benefit, while only 1,250 seniors choose to sell their policies for a life settlement. With the surge of people over 65 and the growing profile of life settlements as an option, companies that help seniors get top dollar for their life insurance policies are more responsive than ever. With minimal research, seniors can decide whether life settlement is right for them and find the right buyer without a middleman.
This direct-consumer relationship in life settlements will become more prevalent as more seniors see the benefit of turning their life insurance policies into income. The percentage of seniors opting for life settlements, now only a quarter of one percent, will grow along with the older population, especially since a recent study by the Insurance Studies Institute shows that 90 percent of seniors would have sought out a life settlement if they had been made aware of the option.
Even with the boom in the senior population still mostly in the future, health care facilities are reporting a shortage in caregivers trained specifically in geriatric care. As the over-65 population approaches the number of 83 million estimated by the middle of the century, this nation will have a pressing need for doctors, nurses and physician’s assistants who can care for the elderly, and home health care and preventative medicine for seniors will also grow exponentially.
The American Nurse’s Association estimates that by 2022 the U.S. will need more than one million new nurses to care for older Americans. And primary care medicine isn’t the only sector of the health care workforce that needs to intentionally address the coming influx of senior patients; there will also be a need for specialists like psychiatrists, optometrists and podiatrists who specialize in serving people in the over-65 bracket.
A surging population of seniors also means that this country will have more middle-aged adults than ever trying to care responsibly for their aging parents. Serving as a good advocate for elderly loved ones is complicated, and caregivers will need more education than ever to examine the options for financial planning, long-term care, healthcare and other key areas.
Life settlements, which can help seniors pay for healthcare or long-term care using profits from a life insurance policy that is no longer working for them, is one decision caregivers should learn about to help their parents navigate the often-murky world of senior adulthood.
Staying Healthy and Happy as You Age
There are many negative perceptions when it comes to getting older in America. The good news: the pessimistic perception of aging is changing. Most seniors feel younger than their actual age and a study that polled more than 10,000 seniors found that people grew happier as they aged.
The aging process doesn’t have to be as bleak as some make it seem. With the right mindset, you can shift your perspective on growing older to best enjoy retirement. With the right plan of action, you can ease the difficulties of the physical part of the process as well.
How to Help Your Parent Decide Whether They Should Sell Their Life Insurance
The senior years are full of financial decisions with considerable implications for both the older generation and their children, and the plague of scams against seniors lead their advocates to proceed with extra caution. But for many people over the age of 65, selling a life insurance policy is a wise move with the potential to help meet other needs.
The life settlement industry has undergone significant change in recent years, and if your parents have an insurance policy that is no longer serving them well it might be the optimal time to look for a seller. But what considerations go into such a decision? How do you know if it’s the best choice for the seniors in your family?
When to sell your life insurance policy?
First, children seeking the best option for their parent’s life insurance should educate themselves on the potential reasons for selling. If your mother or father is having trouble paying the premiums, if they need extra income for medical or long-term care, if they are over insured or the situation of their beneficiaries has changed so they no longer need the policy, they might be better off arranging a sale.
Your research should also include questions about the tax implications of either holding onto a policy or selling it. For example, recent changes in the estate tax have created added value for whole and universal life insurance policies, which are usually the types of policies best suited for a settlement. A trusted CPA or financial advisor can be a valuable voice in helping determine the best option for your parent’s individual situation.
Once you determine that your parents will benefit from a life settlement, an easy next step is the Magna Life Settlement calculator, which projects the approximate payout for your life insurance policy.
Because the sale of a life insurance policy affects family members beyond the policy holder, the consideration of a life settlement should be approached carefully, with plenty of input from everyone involved. After you have gathered all of the pertinent information and are ready to begin the life settlement process, you may begin by filling out an online application. If you have any questions, please contact us! Magna has case administrators trained to answer all of your questions and clarify the steps and timetables of your life settlement.