Understanding the Four Main Types of Life Insurance

equity index life insurance, life insurance, term life insurance, types of life insurance, universal life insurance, Wheaton estate planning attorney, whole life insurance, willsFor obvious reasons, purchasing life insurance is an emotionally charged decision. Still, it is an important move that could save loved ones from financial hardship. This is especially true if you are the main income earner within your family.

It is a smart idea to consult a legal professional to discuss any concerns you have related to life insurance, wills, and estate planning. An experienced estate lawyer can provide feedback and advice based on your particular circumstances.

One of the most common challenges that come with purchasing life insurance is knowing the difference between the various policy types. Below is a basic breakdown of the most common insurance plans.

Term Life Insurance

Term life insurance is generally the most affordable. These plans aim to provide a specific and reliable premium for a set amount of time. Options to increase the premium are usually available to clients who exceed the plan’s duration.

Whole Life Insurance

According to CNN Money, these plans guarantee a specific cash amount at the time of death, and they usually require a steady payment plan that rarely changes. Given the guarantee, this plan ends up being a more expensive choice but can offer greater financial security should the worst happen.

Equity Index Life Insurance

A form of whole life insurance, equity index policies tie potential earnings to a specific market index. For many, this is an attractive option since, depending on the stock market at the time of death, one can accrue greater payouts than other plans would offer.

Universal Life Insurance

Universal life insurance plans have the benefit of providing a tax-free cash value, but they come at a higher cost than other policies. Many people find universal life insurance attractive since there is the option to adjust the premium each month. It is also possible to borrow against these types of policies, though this can be a risky decision.

When choosing a life insurance policy, the advice of a Wheaton estate planning attorney may prove invaluable. For legal services in Wheaton, contact the Illinois law office of Stock, Carlson, Flynn & McGrath, LLC today at 630-665-2500.

Should I Use An Irrevocable Life Insurance Trust?

It’s very likely that during a conversation about estate planning that life insurance has come up as a topic. As a tool for planning for your family, life insurance can be a cornerstone of your financial plan, giving your family a sense of security in case something happens to you. When chosen properly and combined with an irrevocable life insurance trust drafted by your attorney, you can ensure that your family will remain safe and protected in the future.

LauraAn irrevocable life insurance trust is one way to protect the proceeds from any life insurance policies you own at death being included in your estate. If the policy owner was able to withdraw cash value and alter the beneficiary, then the IRS views this as “incidents of ownership” and state taxing authorities and the IRS can step in to tax proceeds at death.

This specific type of trust is designed entirely for life insurance policies. You can transfer the ownership of the life insurance policies to the Trustee of your ILIT, therefore giving up “incidents of ownership” and protecting the proceeds from your policies from being taxed.

The ILIT will be named as the primary beneficiary on your policies. When you pass away, the proceeds will be deposited into the trust help for your spouse, children, or other beneficiaries. This plan is especially powerful when it allows your family assistance with money to pay the tax bill while keeping your overall estate tax responsibility as low as possible. You can even make use of the generation-skipping transfer tax exemption by allocating the exemption against to discounted dollars (viewed as premium) when you stack these up against the value of the insurance proceeds.

If you are ready to get started with your irrevocable life insurance trust documents, contact an Illinois estate planning lawyer today.

Whole Life vs. Term Life Insurance

Life insurance policies come in several different types. The two main types of policies are term life and whole life. Within each are their own individual subcategories that are designed to suit differing individuals.

TheresaThere are no definitive rules when deciding which type of policy is going to be the best for you. Although term life policies can appear cheaper and a more financially viable option to begin with this is not always the case. In the long run, researching and understanding the main differences between the two types of insurance can help you to make the most informed decision.

The length of the policy coverage is the main differentiating factor; whole life insurance covers you for your entire life whereas the duration of the coverage of term life depends on the particular terms of the policy. Term life will provide coverage for as long as you pay your premiums, there are term policies that have a fixed term such as 10 years, 20 years etc… Some insurance companies will also allow you to convert some or your entire insured sum into a whole life policy after a period of time or at the end of your term policy.

Cost is also a factor that should always be considered. Term life insurance is cheaper than whole life insurance because term policies only make payouts in the event of the insured’s death. Some whole life policies will make cash payments when the insured reaches a certain age or at retirement age. There are also plans that will pay out if there are certain disabilities such as the loss of limbs.

People who have financial obligations, which make them unable to pay the larger premiums that are required with whole life plans, usually take out term life insurance. Although term life insurance premiums are cheaper whilst the insured is at a young age, the premiums usually increase as they get older. The benefits of whole life plan premiums are that they are usually at a fixed rate for the first ten years, after that the premiums will be revised and reviewed if necessary. These premiums are determined by the overall investments that are obtained and secured by the policy.

The difference in insurance payouts is also quite different for the two types of plans. Term life insurance will only pay the amount of money insured if the event of the death of the insured. So if you die after the policy has ended then, no payments will be received and there is no refund of the paid premiums if you live longer than the period of coverage. Whole life is a much more secure option for many as it covers your entire life so, upon death the insured sum will always be paid.

The two policy options can be combined to create the insured individual a plan that suits their personal needs and requirements. A whole life policy can be supplemented with a term policy for certain aspects such as home mortgages if this is what the insured prefers. If you have questions regarding protecting your family in the event of your passing, speak with a qualified Illinois estate planning attorney today.