Life insurance can be the foundation of your financial strategy and can help you leave a lasting legacy. It provides financial protection for your beneficiaries when you die. Some life insurance policies also accumulate cash value, offering a living benefit that can be used for supplemental retirement income, funding for a child's education or cash for emergencies.
The are two basic kinds of life insurance policies: whole life and term insurance.
Whole-life policies, a type of permanent insurance, combine life coverage with an investment fund. Here, you're buying a policy that pays a stated, fixed amount on your death, and part of your premium goes toward building cash value from investments made by the insurance company.
Cash value builds tax-deferred each year that you keep the policy, and you can borrow against the cash accumulation fund without being taxed. The amount you pay usually doesn't change throughout the life of the policy.
The other type of coverage is term insurance, which has no investment component. You're buying life coverage that lasts for a set period of time provided you pay the monthly premium. Annual-renewable term is purchased year-by-year, although you don't have to requalify by showing evidence of good health each year.
With life insurance, you can help your family:
• Keep paying the home mortgage.
• Maintain their current standard of living.
• Pay off debts, estate taxes, and final expenses.
• Create a fund for college education.
• Create a fund for a family member with special needs.
• Protect their dreams for the future.