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Life insurance 101

Term Insurance

This is a very simple form of insurance. Coverage is purchased for a specific time period for a specific price. If the insured dies during the life of the policy, your chosen beneficiary receives the stated value of the policy. Term insurance can be purchased for specific periods of time, from 10 to 40 years.

Whole Life Insurance

Whole Life insurance provides permanent life insurance protection with guaranteed premiums, cash values and death benefits. The base policy death benefit is guaranteed to be paid at the insured’s death, provided that the contract premium is paid when due. Whole life contracts classified as “participating” offer the possibility of policy “dividends.” Such policy dividends are not guaranteed and represent a return to the policy owner of part of the premium paid. A dividend may be taken as cash or a policy may offer several other ways the dividend might be used:

  • To reduce current premium payments
  • To buy additional, completely paid-up insurance (known as paid-up additions)
  • To be retained by the insurer, earning interest for the policyholder
  • To purchase one-year term insurance
  • To be added to the policy’s cash value
  • To “pay up” the policy earlier than originally scheduled

Universal Life Insurance Product types

Universal life insurance is a permanent insurance contract that provides level or adjustable premiums and coverage, with cash value. Cash values may increase based on the performance of certain assets held in the company’s general account. Universal Life provides the added flexibility to:

  • Complete premium flexibility – increase, decrease or stop paying
  • Monthly credited interest
  • Ability to increase or decrease the amount of coverage
  • Multiple death benefit options
  • Open architecture of policy fees and expenses
  • Crediting rates / investment returns depend of type of contract chosen
  • May provide policy guarantees – premiums / death benefits

Universal life insurance is most suitable for long-term business planning, estate liquidity, estate taxes, charitable gifts, and/or retirement needs

Current assumption UL
Guaranteed Universal Life - (GUL / NLG)
Index Universal Life
Variable Universal Life (VUL)
Survivorship Insurance
Private Placement Variable Universal Life (PPVUL)
Disability Insurance
Long Term Care Insurance / LTC

Current assumptions universal life insurance

Current assumption UL provides permanent insurance coverage with interest crediting based on the insurance companies declared fixed rates.

Guaranteed Universal Life - (GUL / NLG)

Guaranteed Death Benefit/Premium Universal Life provides you the valuable added protection of a death benefit and premium guarantee (i.e. Secondary Guarantees). These secondary guarantees provide that the death benefit is contractually guaranteed to last the designated time frame (usually the lifetime of the insured), provided premiums are paid as specified on the client ledger. Regardless of the interest rate changes, premiums may not be increased during the lifetime of the insured.

Index Universal Life

A permanent life insurance policy that allows policyholders to tie accumulation values to a stock market index. This policy allows you flexibility for premium payments.

Although equity indexed annuities have been around for a number of years, equity indexed universal life insurance is a relative newcomer to the life insurance marketplace. The amount of interest you are credited on your policy is tied to the performance of a particular index: S&P 500 is one of the most popular. Every year (or index segment), the amount of interest credited to the policy is based on the positive performance of the index chosen. Most products guarantee that your interest crediting rate will never fall below zero so that you won’t lose money.

Indexed universal life insurance policies typically contain a minimum guaranteed fixed interest rate component along with the indexed account option. Indexed policies give policyholders the security of fixed universal life insurance with the growth potential of a variable policy linked to indexed returns. As long as policy minimums are met, the premiums can be increased or decreased in order to meet the insured’s goals.

Variable Universal Life (VUL)

Variable Universal Life offers similar features as Universal Life, with the added component of premium investment allocation. A VUL contract permits the policy owner to allocate a portion of each premium to one or more investment options (stocks and/or bonds). As with Universal Life, the death benefit, and premium structure may be modified to meet changing needs. Most suitable for younger age clients with long-term obligations: retirement planning, asset protection and business planning, etc.

Variable Universal Life offers similar features as Universal Life, with the added component of premium investment allocation. A VUL contract permits the policy owner to allocate a portion of each premium to one or more investment options (stocks and/or bonds). As with Universal Life, the death benefit, and premium structure may be modified to meet changing needs. Most suitable for younger age clients with long-term obligations: retirement planning, asset protection and business planning, etc.

Survivorship Insurance/Second to Die

This insurance covers two persons, usually husband and wife, under one policy. The premiums are generally less than individual policies as the policy only pays on the “second” death. This policy is often used as part of an estate planning strategy to assist paying a family’s estate taxes.

Private Placement Variable Universal Life (PPVUL)

Private Placement Insurance Products are non-registered contracts that are offered exclusively to high net worth individuals. PPVUL is a non-registered U.S. tax compliant flexible premium life insurance policy that provides the same income tax-exempt death benefits as other variable life insurance policies. Premiums less charges and fees are invested into the various investment options inside the insurer’s separate account. PPVUL provides flexible investment options (with some non-registered investments within asset classes that are not available in other life insurance policies), flexible premium payments. Minimum Premiums are usually $1 MM.

Disability Insurance

Disability insurance coverage provides a portion of the insured’s earned income with monthly payments while disabled due to an accident or illness. If you become disabled, disability insurance provides a portion of your income for a preset time and stated amount. Benefits can range from 2 years, 5 years, or until age 65 or 70.

Long Term Care Insurance / LTC

Long Term Care insurance (LTC) provides coverage needs such as: home care, assisted living, adult day care, respite care, hospice care, nursing home, and Alzheimer’s. People who receive LTC are often not sick in the traditional sense. They need help with their basic activities of daily living (ADL’s) such as dressing, bathing, eating, toileting, continence, transferring from bed or chair, and walking. LTC coverage can be tailored to fit your budget and individual needs.

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