Life Insurance.
Life insurance is a useful tool to help people plan how to take care of the people who are most important to them. Meeting with an agent working in the capacity of a fiduciary will try to find the best fit for the clients placing the client's interest above their own in several ways.
There are several uses for life insurance:
Taking care of loved ones.
Used as a type of tax shelter.
Has flexible options of renewable to guaranteed whole life insurance.
Whole-Life: Whole-life insurance covers an individual for a set amount of benefit. Whole-life expires at age 100 and qualifies for cash disbursements at age 65.
Term-Life: Term-life insurance allows people to pick a certain amount of time to be insured for. An example would be $100,000/10yr which would be a $100,000 benefit for 10 years. There are different options available for term insurance.
Variable whole-life: This is a type of whole-life insurance that is based on an underlying asset such as securities in the case of Stegosaur Investments, Inc. The cash value of variable whole-life contracts may be subject to change as the underlying assets change in market price. The amount that doesn't change is the face value of the contract being the benefit amount should something happen that would cause a payout.
Variable term-life is the same as variable whole-life with the exception that there is a maturity date of the life insurance contract as there is with other types of term insurance. The key thing to remember is with the word term it can also mean termination or maturity date which are used synonymously. The face value of variable term life also does not change, but the cash value does base on the underlying assets in the portfolio that provides larger (sometimes smaller) returns than would otherwise be found in traditional forms of life insurance contracts.
The cash value can be borrowed after a certain period of time. The waiting period is after the first period beginning of the second period which the insurance contract would then cover. Borrowed money does accrue interest at the maximum legally allowed chargeable which is 8% of the total borrowed. Unpaid interest will then be paid with a second cash loan from the cash value of the contract.
Each payment made does have a portion that is managerial expenses. These expenses are incurred when an agent is paid to record the transaction, and to update the policy that the transaction has occurred. Doing this upkeeps the records of the issuer to show that your policy is indeed up to date. The more payments that are made the more times an agent must be paid to do their work. They are paid an hourly wage, and the potion of their wage that is devoted to maintaining your account is then passed forward as a managerial fee.
Whole-Life Additional Information.
Whole-Life is a type of insurance that once paid in full will require no additional premium payments, and cannot have additional charges applied once paid off. Whole-life starts at the time the first premium and completed application are received by the insurance producer. The way that this is calculated is by examining the total benefit payout.
An example of the calculation would be this: f(Premium Payment) = [ ( Benefit Payout / ( 100 - Actual Age ) ) / Number of Payments in a Year ] + Fees. Each payment that is received has a management fee which is associated with it which is a set rate per payment. This makes it more advantageous for people to make yearly payments instead of monthly, or bi-weekly payments.
Term-Life Additional Information.
Term-Life Insurance: term-life is an option people use when they are engaged in perils that would be short-term exposure. The amount of time that the person is exposed to some dangerous things that could cause death by accidental or natural means increases. This is the reason that people choose to use contracts such as these. The contract is designed to cover the amount of time that an increase of hazard will occur. An example of how these policies are calculated is below:
f ( premium ) = [ Benefit Amount / ( Years * Number of Payments ) ] + Managerial Expenses
It is through the above calculation that your premium for a term-life policy is calculated.
Variable Life Additional Information.
Using the variable option when choosing a life insurance package means that the cash value of the policy will fluctuate with the value of the underlying assets. These types of contracts have the cash value invested in stocks, bonds, mutual funds, and other types of investments. The values of these investments can vary day-by-day hence the name Variable. These contracts can be in the form of either whole-life or term-life contracts. There is a certain amount of flexibility with them in that regard.
A portion of the premium as with any policy is used to invest in the underlying asset class that the client is comfortable with. These types of policies can only be issued by a producer which has also gone through FINRA series tests: SIE (Securities Industry Essentials) + Series 6. People who have also gone through a Series 7 offered through FINRA may also be able to sell variable life contracts if they also have a current L & M ( Life and Medical) producer license in the state they are issuing the policies. This is the reason a financial advisor is normally the person who sells these types of contracts being they will have gone through both the L&M as well as the FINRA (Financial Industry National Regulatory Authority) requirements to fulfill both NAIC ( National Association of Insurance Commissioners). The financial advisor will keep track of the underlying assets with their financial knowledge, and be able to issue the best-fit policies for their clients through the approach of a fiduciary. Fiduciary places the interest of their clients above their own, and does everything they can within legal scope to maintain the well-being of the client in the client's financial life.