Welcome to Season 2, Episode 5 of Meet the Expert® with Elliot Kallen!
Insurance is a means of protection from financial loss.
We all hold policies of all types, from auto insurance, to fire insurance, and even identity theft insurance. Without it, you could be bankrupted by any number of worst-case scenarios: a car accident, house fire, or a nasty cyberattack.
But for something so essential to our financial well-being, insurance is a complicated—and sometimes uncomfortable—topic. This is especially true when it comes to life insurance!
In this episode, Elliot Kallen brings on Tracy Tamura of Midland National Life to discuss what nobody wants to talk about: the reality of why everyone needs life insurance.
Regional VP, Midland National Life
Tracy is the Regional Vice President of Northern California at Midland National Life.
How does life insurance work?
Especially over the last decade, the marketplace has become prolific in terms of the types of policies available for purchase. Here are the basics.
Term insurance provides coverage for a certain period of time or a specified "term" of years.
You can buy insurance for a term of 10, 20, or 30 years.
Permanent life insurance policies refer to all life insurance policies that do not expire.
Permanent life insurance usually combines a death benefit with a savings component.
The two primary types of permanent life insurance are whole life and universal life.
You can earn interest on the premium that you send to the company.
In a whole life policy, you have 2 options: you can just pick an interest-only option, or you can take the interest that you earn and apply it towards paid-up additions or towards dividends.
Dividends can be applied to premium payments.
Let’s say your whole life policy is worth $100,000 and offers a 3% dividend.
Your policy will pay you $3,000 for the year.
If you contribute another $4,000 in value next year, you’ll receive $120 more for a total of $3,120.
These amounts can increase over time to sufficient levels to offset some costs associated with the premium payments.
Variable Universal Life
Variable universal life is a type of permanent life insurance policy with features that include cash value, investment variety, flexible premiums and a flexible death benefit.
Indexed Universal Life
Indexed universal life insurance is a type of permanent life insurance. The money in your cash value account can earn interest based on a stock market index chosen by your insurer, such as the S&P 500 or the Nasdaq Composite.
How do I borrow against my life insurance policy?
Life insurance has a special tax exception which allows you to borrow against your permanent or whole life policy, but not a term policy.
You pay your premiums with money that has already been taxed. Once it goes into the policy and accumulates in your cash value account, you’re able to take a tax-free loan or withdraw.
How do age and life expectancy affect life insurance rates?
We’re getting older, and we might not die for awhile, but there will be a lot of health issues that come up between retirement and death—including Alzheimer's, cancer, and heart disease.
Life expectancy is the single most influential factor that insurance companies use to determine life insurance premiums.
Your age is another primary factor influencing your life insurance premium rate, whether you're seeking a term or permanent policy.
What’s the difference between living benefits riders and long-term care riders?
Living Benefits Rider
Accelerated benefits, also known as "living benefits," are life insurance policy proceeds paid to the policyholder before he or she dies.
A living benefits rider allows you to access funds while you’re still living under certain conditions.
Long-Term Care Riders
A long-term care rider is a living benefit on a life insurance policy that lets you access a portion of the policy's death benefit every month to pay for long-term care expenses.
These can be more affordable than standalone long-term care policies.
Be aware that:
- You’ll need to pay upfront care costs, after which you'll be reimbursed by the insurance company.
- Some long-term care riders dictate specific terms of your care. If your rider covers the costs of a Registered Nurse but not a Certified Nursing Assistant, you will have a higher upfront cost.
What happens if I want to surrender my contract?
If I buy a policy for long-term care, and I don’t end up needing it, what happens to that money?
You may surrender your plan to receive a pre-determined "cash surrender value," a lump sum of money that varies in value based on how many payments you've made, and what the overall worth of your policy is.
How can I use life insurance as part of my estate plan?
Life insurance helps you answer the following estate planning questions:
- Do you have enough money to pay taxes?
- Is there money that you’d like to leave to your children? Your spouse?
- What happens if you live too long?
- What happens if you die too young?
- And what happens if you get really sick along the way?
We Can Help
If your family depends on you for financial support, you need to be prepared to give it, even if the worst should happen. Life insurance helps you do just that.
If you need help figuring out which life insurance policy is right for your financial needs, please fill out the form below. We'll get in touch shortly.
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DISCLAIMER: Prosperity Financial Group and Meet the Expert® with Elliot Kallen do not make specific investment recommendations on Meet the Expert® with Elliot Kallen or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of the Meet the Expert® with Elliot Kallen guests, and not necessarily of Elliot Kallen or Prosperity Financial Group.