Life Insurance

Why Life Insurance?

There are two basic types of life insurance: term life, which is essentially a rented policy for a specified period of time; and permanent or “cash-value life, which is insurance for as long as you live. While a mix of both types of policy proves valuable for most investors, financial rewards are attainable only with permanent life policies. Following are some of the key benefits of investing in permanent life insurance and annuities:

Safety. Permanent life and annuities, when backed by the general account of life insurance company, contain financial guarantees, are protected by state guarantee funds, and adhere to strict investment portfolio standards. Enormous losses in today’s stock market illuminate the dangers of investing without guarantees. During the Great Depression, when more than 10,000 banks failed, 99.9 percent of consumers’ savings in life insurance and annuities remained safe with legal reserve life insurance companies.

Earnings in addition to guaranteed rates. Although additional earnings above guarantees are not assured, most life companies paid additional earnings even during the Great Depression. Permanent life insurance and annuities are savings systems. A major problem today in financial planning is that 401(k) and mutual fund marketers have successfully blurred the difference between “saving” and “investing.” When one saves, money is safe and liquid. When one invest, 100 percent of your money is at risk 100 percent of the time. When you save through permanent life insurance and annuities backed by the insurance company’s general account, your funds are safe liquid, and tax-favored.

Valuable tax benefits. Savings and earnings within permanent life insurance and annuities grow tax deferred and loans from insurance are not taxed as ordinary income. What’s more, insurance proceeds are received income-tax-free and, in most cases, estate-tax-free.

Asset protection. Although asset-protection privileges for lawsuits and bankruptcy vary from state to state, life insurance and annuity assets are a favored asset in all states. States with particularly strong asset protection for life insurance and annuities include Arizona, Florida, Michigan, New York, New Mexico, Oklahoma, and Texas.

Income-tax-free-death benefit. Life is a gamble. The greatest risk we face is the risk of premature death. Protecting those people or causes we love with life insurance is a wise allocation of resources.

Professional money management. Savings within a life insurance company are professionally managed to secure the highest rate of return with the maximum amount of safety. You will enjoy diversification by industry as well as by geography.

Life insurance and annuities can perform additional economic jobs as well. By attaching riders onto base life insurance and annuities, they can provide additional benefits for disability protection, long-term care, critical illness, and retirement funding.

Life Insurance and annuities are wills unto themselves. They are able to accommodate multiple and complex beneficiaries, and can be easily changed without legal costs. At your death, they also bypass probate – thus avoiding legal bill, appraisal costs, taxes, and other expenses common even to midsized estates.

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