A federal law passed at the end of 2020 has made permanent life insurance more attractive to some people. The law essentially tweaks the tax code to allow owners of permanent policies to put more money into the savings portion of their policy. As we have explained previously, permanent policies, also known as whole life policies, are a combination insurance-and-savings vehicle.
Permanent life insuranceÂ is defined as aÂ whole-life policy, one that doesnât expire and may provide a number of benefits during theÂ policyholderâs life and when they pass away. It’s not a specific type of insurance, as such, and is instead an umbrella term used to describe life insurance policies that are not fixed to specific terms.
There are two types ofÂ permanent policies:Â Whole Life InsuranceÂ andÂ Universal Life Insurance. UnlikeÂ term life insurance, which is fixed to a specific term,Â permanent insuranceÂ policies are designed to be paid for the entirety of theÂ policyholder’s life, with aÂ death benefitÂ released upon their death.
Take a look at these pros and cons to see how aÂ permanentÂ life policyÂ can benefit you.
Permanent life insuranceÂ is not limited to a fixedÂ period of timeÂ and providing you keep meeting those monthly premiums, theÂ death benefitÂ will be released to your heirs when you die.
Permanent life insuranceÂ is often likened to a savings account and aÂ life insurance policyÂ combined, as it has aÂ cash valueÂ that you can collect as you see fit. You can see theÂ policy’sÂ cash valueÂ during the term and withdraw as much money as you need.
What’s more,Â the cash valueÂ grows on aÂ tax-deferredÂ basis, which means the policyholder is not required to pay taxes on the money it generates.
With whole andÂ universalÂ life policies, yourÂ premium paymentsÂ remain the same, which means you don’t need to worry aboutÂ variable life insuranceÂ rates changing from one year to the next. You should pay the same in the first year as you pay in the 20th year.
The extended coverage and extraÂ investment optionsÂ come at a greatly inflated price, asÂ whole-life policiesÂ tend to be much more expensive than their term-life counterparts. How much you pay will depend on theÂ amount of coverageÂ provided, but it’s generally a lot higher than aÂ termÂ life policyÂ with the same payout.
A lot can happen in 50 years and aÂ deathÂ benefitÂ that seems like a huge sum now may be worth much less in 40 or 50 years when you eventually pass away. However, it’s worth noting that yourÂ life insurance premiumsÂ will remain the same as well, so itâs all relative.
Term-life insuranceÂ is relatively simple. You pay a sum of money every month and if you die within the term, yourÂ loved onesÂ will be given a cash sum. However, once you consider theÂ cash value,Â tax-freeÂ withdrawals, potential dividends, and more,Â permanent insuranceÂ policies are more complicated.
There are severalÂ types of life insuranceÂ and if you’re being rejected forÂ permanent life insuranceÂ or receive quotes that are far too high, it’s worth looking into one of these other options.
With aÂ termÂ life insuranceÂ policy, you won’t be covered for yourÂ entire life, but you will receive extensive coverage for aÂ number of years. These policies are available for less, because if theÂ policyholderÂ outlives the term they won’t collect theÂ death benefitÂ or any other payments and theÂ life insurance companyÂ will secure all the profits.
Seniors are generally refused for term andÂ whole-life insuranceÂ policiesÂ because the risk is too high. However, finalÂ expense life insurance can provide many of the same benefits, with aÂ death benefitÂ paid to yourÂ loved onesÂ when you die. The premiums tend to be high and the payout low, but if you’re above the age of 60 this is one of the few options you have forÂ life insurance coverage.
Final expenseÂ insurance is often used to pay for funerals,Â estate taxes, and debt, but there are no restrictions regarding how it can be used.
JointÂ life insurance policiesÂ are targeted at spouses seeking to provide cover for each other and their children. The options include first-to-die insurance, where the money will go to the surviving spouse; and second-to-die insurance, which pays theÂ death benefitÂ to beneficiaries when both applicants die.
If you can get your head aroundÂ permanent life insurance and understand what you’re paying and what benefits itâs providing, it could be the right choice. This is especially true if you have the money to meet those payment obligations every month and want the extra asset that theÂ cash valueÂ can provide.
However, if yourÂ insurance needsÂ revolve entirely around protecting yourÂ loved ones,Â term-life insuranceÂ is probably the better option. AÂ termÂ life insuranceÂ policyÂ generally offers a high payout for low premiums (when compared toÂ wholeÂ life policies). This sum can be used to clear debt, pay off the mortgage, and set yourÂ loved onesÂ up for life. And just as importantly, it provides you with theÂ peace of mindÂ that comes from knowing your nearest and dearest won’t be destitute if you die.
Older applicants may struggle to get affordable term andÂ whole lifeÂ insuranceÂ products, but that’s whereÂ final expenseÂ insurance comes in. This is a limitedÂ type of policyÂ with aÂ coverage amountÂ of less than $50,000, and an average amount of less than half thatâmore than enough to cover funeral expenses and most types of debt.
You’re never too young, old or sick to be considered for life insurance.Â
It’s all about probabilities. Underwriters will consider all the data you provide them with and use this to calculate theÂ likelyÂ date of your death. It sounds morbid, but when your business is death, things can get a little dark every now and then.
Imagine, for instance, that you’re a 20-year-old male with a clean bill of health and a brand-new family to look after. AÂ life insurance companyÂ will be more than happy to provide you withÂ term life insurance, because these products are limited to 30-years and the odds are high that you will live to be 50. Not only will they be more than happy to sign you up, but they will also offer you a good price because you’re deemed to be such a low risk.
If you opt for a permanent life insurance policy, the premiums will be higher because theÂ death benefitÂ payout is more likely. However, they also know there’s a good chance you will face financial difficulties during the next few decades, in which case you may stop making those payments or accept theÂ cash valueÂ as soon as it reaches a respectable sum.
As you age, your risk increases, and the same applies for smokers and people with pre-existing medical conditions. They will still be more than happy to receive your business, it just means your options may be a little more limited and your premiums may be much higher.
So, keep searching, keep comparing, and work on improving your health to bring those premiums down.
What is Permanent Life Insurance and How Much do you Need? is a post from Pocket Your Dollars.
Hello friends! Praise be, the election is over and I just marked my birthday over the weekend – my official holiday season milestone. Whenever the calendar passes November 8, I feel like I can finally turn 100% of my attention to all things holiday. Obviously, the holidays are going to look and feel very different than years past. Perhaps instead of the holiday season, we should start referring to the next few months as the hunker down season. Because that’s what holidays in the time of Covid are going to require of us. But I’m not entirely mad about the idea of holing up at home. I’ll take a very valid excuse to look for ways to make my home as cozy, comforting, and beautiful as possible.
Enter the new rug collection from Beni Rugs, designed by my style soul twin, Colin King.
Called the Shape of Color, this new rug collection offers eleven Moroccan style rugs. Each rug features shocks of color inspired by Tangier and Marrakech. The hues are deeply saturated in simple geometric shapes or big bold stripes.
While I typically eschew color, rugs are a wonderful spot to inject something fresh into a room. I used a bold colored rug in my own living room. The particularly nice thing about a rug – it’s an easy way to reenergize a space without really having to change anything else.
There are a few secrets to picking out a rug. First, you want to think about size. A common mistake is getting a rug that is too small. You want all (or nearly all) your furniture in a space to sit on your rug. That helps a room feel anchored and like everything is working together. A too-small rug will actually make a small space feel even smaller!
Next, you want to think about foot traffic. If you’re looking to put a rug in a high foot traffic area, you’ll want to ensure any rug you select will withstand an onslaught of dirt and use.
Finally, when adding a colorful rug to your space you don’t need to “match your decor. You just want to keep everything in the same design family. Do you decorate with mostly warm colors or cooler tones? That will help you pick your colors.
If you’re looking to upgrade the coziness of your home before the holidays hit, I definitely think one of these rugs would be a great way to do it. I’m already debating which one I might add to our house. I do have a home office refresh in the works! If I pick out one of these rugs – I’ll be sure to share.
How are you planning on sprucing up your spaces for the holidays?
images c/o beni rugs
The post A Cozy New Rug Collection appeared first on Apartment34.
Hi friends. So sorry to go completely MIA on you. Between attempting online school with a five-year-old, much of California burning to the ground, and the general state total chaos in which we find ourselves, getting to the computer for any length of time has been a bit of challenge, to put it mildly. And then I blinked and summer is officially over.
But I had to finally get on here as I have big news for you!
They say you shouldn’t make major life decisions during times of extreme stress, right? Well, we decided to throw all caution to the wind and instead have purchased a coastal cottage in Washington State! Apparently a global pandemic, homeschooling a kindergartner and the most consequential presidential election of our lifetime wasn’t enough to keep me busy.
In all seriousness, if the past seven months of Covid have taught us anything, it’s the importance of friends and family and so we decided to create a gathering place that can bring together those we love most for years to come. Nestled within the myriad of inlets and islands that dot the Puget Sound north of Seattle, the cottage enjoys sweeping views of the Olympic mountains and Hood Canal. I consider it my official respite from the impending doom. Sadly it looks nothing like the inspiration images I’ve collected here.
Instead, it is going to take a LOT of work to get our little coastal cottage visitor ready – and in a very short period of time. Over the coming weeks, I plan to take you along on the entire design journey. I will be sharing everything with you – from the cottage’s current state, to all of my design inspiration and through the remodel process. If all goes according to plan, I’ll share a major before and after reveal in time to spend the holiday season with our family rather than more than 800 miles away.
Trust me, we’re going to have plenty to discuss, as I have to pick an entire household’s worth of things – from paint colors and kitchen cabinets down to dishware, bedding and everything in between. No design decision will be left unturned. It’s both exhilarating and incredibly daunting. These mood boards are just part my first ideation session for my dream vibe.
I’m hopeful sharing this process with you will offer you some fresh design ideas and positive inspiration as we all hunker down to weather what will undoubtedly be a stormy fall – be it literally or just politically. It’s been a rather dark year and I feel like this might be a way to share a little bit of light. I know I am very happy for the creative distraction. I hope you are too.
I can’t wait to share more very soon!
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