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Life Insurance

Life insurance is designed to do one thing and that is to protect an individual’s greatest asset; their Income.

Life insurance coverage is there to provide an income in the event of an untimely death to the wage earner or person’s responsible for
paying the bills. It is also there to provide money for burial, final expenses, estate and other various taxes.

As we go through life we are all responsible to someone else, somewhere along the way. By having life insurance in place it enables us to
take care of those we are responsible for in the event that we are no longer alive to take care of them.

Each one of us are essentially all just Money Machines for the people we take care of and ourselves. We create money on daily basis in one
way or another and Life Insurance is the only replacement for THE Money Machine; there is nothing else that replaces it.

Some people have the good fortune and plans in place to save and properly invest so that if something were to happen they would have the
money already there to take care of their loved ones. This is good but they still should have Life insurance in place so the estate doesn’t have to be
liquidated in order to pay for burial, final expenses and taxes. No matter what happens these 3 things will have to be paid.

 

Replace income for dependents if there are people that depend on your income, your life insurance policy can provide them with the resources that they need to survive. If you are parent supporting children, you would want to make sure that your children have the money that they need if you passed away. Although children are often the first dependents that individuals think of, this situation can also apply to partners or spouses, parents, siblings or even adult children that are dependent on your income. After your death, your spouse or your domestic partner may also see a decrease in his or her government or employer sponsored benefits. The insurance money that they receive can help them compensate for this loss as well. 

 

Pay final expenses the cost of putting a loved one to rest can be very expensive. After you pass away your family will be required to pay the funeral, burial, medical, estate and administration costs. Your next of kin will also be left to pay any unpaid debt that you may have. Your life insurance can be put towards these expenses, to alleviate financial stress from those that you leave behind. 

 

Create an inheritance for your heirs if you do not have any other type of asset, your life insurance can be given to heirs as an inheritance. You simply have to name each heir as a beneficiary in your life insurance policy. 

 

Pay federal “death” taxes and state “death” taxes. Any estate valued at $5 million or more will be taxed at a 35 percent rate. The taxes that are applied to your estate can be a large burden on your heirs. Your life insurance policy can help your heirs pay those taxes. 

 

Make significant charitable contributions if you would prefer to make a charity your beneficiary on your life insurance. You can make a large donation at the time of your death; this donation will be larger than if you decided to donate the cash equivalent of your policy's premiums. 

 

Create a source of savings. There are some life insurance policies that enable the owner to withdraw or borrow the money that has been invested in the policy. Purchasing a policy that has this cash-value can help people save money effectively. The interest that accumulates in these accounts is tax deferred or tax exempt if the money is paid as part of the death claim.

 

It is important to understand that the life insurance policies that are offered to groups are different than the life insurance policies that are offered to individuals.  The information we have listed below focuses on life insurance that is offered to individuals in Washington State. 

 

Term

Term life insurance is the simplest type of life insurance. This policy will pay out only when death occurs during the term of the policy.
The terms vary from one to 30 years. The majority of term insurance policies do not have any other benefit provisions. 

 

There are two basic types of term life insurance policies—level term and decreasing term.

 

Level term - The death benefit will stay constant throughout the duration of the policy.

 

Decreasing term - The death benefit will decrease, usually in one year increments, throughout the course of the policy's term.  

 

97% of all term life insurance purchased in 2003 was level term. 

 

Whole Life/Permanent:

A permanent or whole life insurance policy will pay a death benefit, whenever you pass away. The three types of whole life insurance are
traditional whole life, universal life and variable universal life. Within these types of whole life insurance there are also variations. 

 

Traditional whole life insurance is set up so the death benefit and the premium stay the same or level throughout the life of the policy. Because the cost of policies increasing as an individual ages, the insurance company will charge a premium that is higher than what is needed at that time. Then the insurance company invests that money to ensure that the death benefit will get paid out to the beneficiary at any given point in the insured life span. This system works much better than the insurance company increasing the rate of the premiums as the insured individual ages; it would be more expensive for the insured to pay premiums at an older age.

 

There is a law that states when these "overpayments" reach a specific amount they must become available to the policy owner as a cash value if the individual decides to not proceed with the original plan. This cash value becomes an alternative  not an additional benefit under the policy. 

 

Universal life insurance and Variable Universal life insurance were both introduced in the 1970s and 1980s as variations on the traditional whole life insurance policies.

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