September was declared “Life Insurance Awareness Month” in 2004 by the industry education organization Life Happens. Life Insurance Awareness Month aims to educate Americans about the importance of life insurance and how it can help a family’s financial well-being. Why Do People Buy Life Insurance? Applying for life insurance, like purchasing any other financial asset, should have a purpose or reason. There is a wide range of motivations for people to purchase life insurance, but some of the most common are:
- To ensure the financial security of the designated beneficiaries
- To plan estate liquidity, asset equalization for heirs, and wealth transfer.
- To pay off a specific debt, such as a mortgage
- To satisfy the claims of a spouse in a divorce settlement
- To invest in something like a single premium life insurance policy
Types of Individual Life Insurance Life insurance policies are classified into two broad categories: (1) Individual or group sponsored (2) Permanent or term life insurance. Both are addressed in this article. Individual Life Insurance vs. Group Life Insurance
- An individual life insurance policy. An individual can apply for an individual life insurance policy from an insurance company that provides such policies. The individual will most likely qualify for the insurance because the insurance company will check the individual’s medical records, and the individual will most likely have to undergo a medical exam.
- The life insurance policy is provided by the group. An employer provides a life insurance plan for its permanent employees, who are eligible to participate in the plan when hired. The federal government’s Federal Employees Group Life Insurance (FEGLI) program is an example of a group-sponsored life insurance plan. A group-sponsored life insurance plan is a “guaranteed issue,” meaning that the individual applying for coverage does not need to provide evidence of insurability. Employees of all ages, smokers, and nonsmokers, are welcome to apply. Individual medical records are not checked, and no medical exams are performed.
Term Life Insurance vs. Permanent Life Insurance (Cash Value)
- Term life insurance policy. Term life insurance provides complete protection (as a death benefit) against financial loss caused by death during a specified period. Term life insurance is usually the most appropriate and best buy for someone who only needs life insurance for a short time – less than 30 years. In a nutshell, term life insurance provides the most coverage for the least amount of money (premiums). It is not intended to meet a long-term need for life insurance.
- Permanent Life insurance with a cash value. A permanent (cash-value) policy is life insurance that does not expire as long as the policyholder pays the premiums or does not exchange one cash-value life insurance policy for another cash-value life insurance policy. This article dissects the three most common types of permanent life insurance policies: whole, universal, and variable life.
(1) Whole life insurance. A whole life insurance policy provides death benefit protection at a fixed premium for the insured’s entire life. A whole life policy is also known as a “straight line” policy. Part of the premium is put into investments that earn a fixed rate of return. (2) Universal Life insurance. Universal life insurance combines a death benefit (in the form of term life insurance) with a cash value fund that grows tax-free as long as the insurance is in force. The insurance company deducts certain expenses and the first month’s pure insurance protection (the death benefit) from the initial premium paid with a universal life insurance policy. The remainder of the premium is invested in a cash-value fund, typically a high-yielding government securities fund, and earns market-rate interest. The cost of an additional month’s death benefit plus expenses is deducted from the cash value fund each month. (3) Variable life insurance policy. Variable life insurance combines life insurance’s tax-free deferred savings functions with the growth potential of equities (stocks). Like traditional life insurance, variable life insurance policies have fixed premiums and a guaranteed death benefit. However, unlike other cash-value life policies, such as whole life, the cash value is not guaranteed and will fluctuate following the performance of the portfolio chosen by the insurance policy owner.
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Bio:
Mark, a lifelong Tulsan graduated from Westminster College, Fulton, Missouri with a Bachelor of Arts in Accounting. Mark served in the United States Army as a Captain in the 486th Civil Affairs BN. Broken Arrow, Oklahoma and retired in 1996. Mark is married to his high school sweetheart Jenny and has four beautiful children. Mark’s passion for his work, which includes over 20 years in the Financial Industry started as an Oklahoma State Bank Examiner. Mark examined banks throughout Oklahoma gaining a vast knowledge and experience on bank investments, small business and family investments. Mark’s experiences include being formally trained by UBS Wealth Management, a global investment firm where he served as a Financial Consultant specializing in Wealth Management for individuals & families. Mark is a licensed Series 24 and 28 General Securities Principal and an Introducing Broker Dealer Financial Operations Principal. Additionally, Mark is a Series 7 and 66 stockbroker and Investment Advisor focusing on market driven investments for individuals, businesses and their families. Mark specializes in providing financial knowledge, ideas, and solutions for federal employees, individuals, families and businesses. We serve as your advocate, and assist you in the design and implementation of financial strategies while providing the ideas to maximize your security and wealth. Our goal is to give you maximum control of your financial future. We provide the expertise to help you with personal issues such as: practical tax Ideas, risk management, investment solutions, and estate preservation. Additionally, we’ve counseled hundreds of employees on their transitions from careers in federal government, and private industry to their next life stage, whether that is retirement or a second career. We specialize in devising strategies that roll your TSP, 401(k), pension plan, to a suitable IRA to meet your objectives.
Disclosure:
Securities offered through GRF Capital Investors, Inc., 6506 South Lewis Avenue, Suite 160 Tulsa, OK 74136 Phone: 918-744-1333 Fax: 918-744-1564 Securities cleared through RBC Capital Markets, LLC. 60 South 6th St., Minneapolis, MN 55402Member FINRA www.finra.org / SIPC www.sipc.orgBroker Check http://brokercheck.finra.org/
