LIFE INSURANCE

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•  In 2022, 106 million American adults were without life insurance or underinsured
•  All income levels are now less likely to say they have life insurance coverage 
•  More than 50% of Americans overestimate the cost of life insurance by 300% 
• 30% of Americans believe life insurance is only for end of life expenses, leading them to not purchase enough to provide income replacement or allow wealth transfer.
• Life insurance premiums increased by 21% in the second quarter of 2021, the largest year-over-year increase since third quarter 1987.

Unlike term life insurance, which promises payment of a specified death benefit for a specific period of years, permanent life insurance lasts the lifetime of the insured (hence, the name), unless nonpayment of premiums causes the policy to lapse. Permanent life insurance premiums go toward both maintaining

the policy’s death benefit and allowing the policy to build cash value. The policy owner can borrow funds against that cash value or, in some instances, withdraw cash from it outright to help meet needs such as paying for a child’s college education or covering medical expenses. 

There is often a waiting period after the purchase of a permanent life policy during which borrowing against the savings portion is not permitted. This allows sufficient cash to accumulate in the fund. If the amount of the total unpaid interest on a loan, plus the outstanding loan balance exceeds the amount of a policy’s cash value, the insurance policy and all coverage will terminate. Permanent life insurance policies enjoy favorable tax treatment. The growth of the cash value is generally on a tax-deferred basis, meaning that the policyholder pays no taxes on any earnings as long as the policy remains active. As long as certain premium limits are adhered to, money can also be taken out of the policy without being subject to taxes because policy loans usually are not considered taxable income. 

Permanent life insurance offers several benefits, including:

1. Lifelong coverage: Permanent life insurance provides coverage for the entire lifetime of the policyholder, as long as premiums are paid, which provides peace of mind and financial security.
2. Cash value accumulation: Permanent life insurance policies accumulate cash value over time, which can be borrowed against, used to pay premiums, or withdrawn.
3. Tax-deferred growth: The cash value of a permanent life insurance policy grows tax-deferred, which can result in significant long-term savings.
4. Guaranteed death benefit: Permanent life insurance policies offer a guaranteed death benefit, which means that the policyholder's beneficiaries will receive a payout upon the policyholder's death, regardless of how long the policy has been in force.
5. Estate planning: Permanent life insurance can be used as a tool for estate planning, providing a tax-free source of liquidity to cover estate taxes, pay off debts, or provide an inheritance to loved ones.
6. Fixed premiums: Whole life insurance policies offer fixed premiums, which means that the policyholder's premiums will not increase over time, making budgeting and financial planning easier.

 Term life insurance is a type of life insurance policy that provides coverage for a specified period of time, typically ranging from 1 to 30 years. If the insured person dies during the term of the policy, the policy pays a death benefit to the beneficiary designated by the insured person. The death benefit is typically a lump sum payment and is designed to provide financial protection to the insured person's family or dependents.

Term life insurance policies do not accumulate cash value and generally have lower premiums compared to permanent life insurance policies, such as whole life or universal life insurance. This makes term life insurance an affordable option for individuals who need life insurance coverage for a specific period of time, such as when they have young children or a mortgage to pay off. Once the term of the policy ends, the insured person may have the option to renew the policy or convert it to a permanent life insurance policy, depending on the terms of the policy.

Term life insurance offers several benefits, including:

1. Affordable premiums: Term life insurance is typically more affordable than permanent life insurance, making it a more accessible option for many people.
2. Flexibility: Term life insurance policies can be customized to meet the specific needs of the policyholder, including the coverage amount and length of the policy.
3. Protection for a specific period of time: Term life insurance provides coverage for a specific period of time, which is often the period of time when the policyholder's dependents are most financially vulnerable.
4. Ease of understanding: Term life insurance policies are straightforward and easy to understand, making it simple to compare different policies and make an informed decision.
5. Convertibility: Many term life insurance policies offer the option to convert to a permanent policy, providing the policyholder with more long-term coverage and potential cash value accumulation.
6. Tax benefits: The death benefit paid out to beneficiaries is usually tax-free, providing additional financial protection to loved ones.