Family
Protection
Plans
Family Protection Plan for your love ones!
Designing a financial plan for you and your family is more than investments. It requires understanding what’s important to you and devising a strategy that can help you achieve your vision for the future. Implementing a proper financial plan can help ensure the financial security of your family, including your spouse and dependents.
It’s important to ensure that you have enough coverage so that you help protect your family in the event you are no longer there. According to a 2010 study by the Life and Health Insurance Foundation for Education, 68 million Americans have no life insurance at all and of those who do have coverage, most don’t have enough to ensure a secure financial future for their families.
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Family Protection Plans and Life Insurance
Most people prefer not to think about it, but it’s an important question. Will your family be financially secure if you are injured, become seriously ill, or worse? Life insurance can give your family financial support after you die.
There are different types of life insurance policies. Make sure you understand the terms of the policy you consider buying. Here are some questions to answer before deciding before you purchase an insurance product.
- What do you want the insurance to cover?
- What amount of coverage do you need?
- How long will you need the coverage for?
- What’s your budget?
Term versus Permanent Insurance
Term life insurance is good for a set number of years. You pay premiums for a certain amount of time. If you die during that time, your family gets the money. People often get term life to cover their families if their death would have a big financial impact. For example, it could be useful if you are saving money for your kids’ college tuition or if you are paying off a mortgage. These are some of the characteristics of a term life insurance policy:
- Lower premium payments.
- Ability to convert into a permanent life insurance policy.
- Ability to renew or extend the policy.
- Does not have a cash value component.
Permanent life insurance, by contrast, lasts your entire life as long as you continue to pay premiums. It’s combined with an investment fund. And it usually costs more than term life insurance. These are some key features of a permanent life insurance policy::
- Potential for flexible premium payments.
- Tax-deferred cash value component.
Five Different Types of Insurances
An IUL is a type of permanent life insurance, meaning it can accumulate cash value and provide a death benefit. Like other types of whole life policies — including universal life insurance and variable universal life insurance — index life insurance is sold as an insurance-investment hybrid.
Here’s what it can offer;
- Flexible death benefit
- Flexible premium
- Cash value grows based on an interest crediting strategy that is tied to changes in a market index such as the S&P 500. (3)
- Downside protection through minimum guarantees(4) to ensure that your cash value will not decline due to decreases in the Index
This policy design is for the customer who needs life insurance but would like to have the ability to choose how their cash value is invested.
Guarantees are dependent upon the claims-paying ability of the insurer and do not protect the value of the variable product portfolios, which may fluctuate. Variable policy holders are subject to investment risks, including the possible loss of principal invested.
The VUL offers the following:
- Flexible death benefit
- Flexible premium
- Cash value grows based on the performance of the professionally managed stock, bond and money market sub-accounts that you choose. You can design a portfolio to match your comfort level and risk tolerance. Policy cash values fluctuate based on the sub accounts in which you are invested and may lose value, including principal.
These policies are designed for individuals who want guarantees and who are focused on providing death benefit protection over cash value accumulation. WL offers:
- Guaranteed death benefit (4)
- Guaranteed cash value
- Potential additional cash value by the receipt of any dividends declared by the company. Although not guaranteed, dividend payments are generally declared annually by the company.
- Level premiums are guaranteed to never change.
May be ideal for the consumer who has a need for life insurance, is somewhat conservative, and wants the guarantees of a fixed, minimum interest rate with the potential for additional interest credits.
Increasing the death benefit may be subject to additional underwriting approval.
The UL offers:
- Flexible death benefit
- Flexible premium
- Policy cash values are credited to a current interest rate that is set by the insurance company, which is subject to change but will never be lower than a guaranteed minimum interest rate.(4)
May make sense for those who have budget limitations, large protection needs or temporary need.
Here’s what it offers:
- Guaranteed death benefit for a fixed period (4)
- Fixed premium.
- No cash value.
- Coverage is for a certain period of time (term), usually for a specified number of years or to a specific age of the insured.
- Initial premiums tend to be lower but will eventually increase.
The Five Types of Insurances Compared
| Description | IUL | VUL | WL | UL | TERM | |
|---|---|---|---|---|---|---|
Temporary coverage | ||||||
Permanent coverage | ||||||
Provides a guaranteed death benefit | ||||||
Focuses on affordability | ||||||
Can provide coverage for your lifetime | ||||||
Has the potential to build cash value | ||||||
Offer growth potential based on performance of index | ||||||
Features a tax –advantaged death benefit | ||||||
Includes the ability to access money in your policy | ||||||
Offers riders to customize your policy | ||||||
Offer growth potential based on market performance | ||||||
- Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Withdrawals up to the basis paid into the contract and loans thereafter will not create an immediate taxable event, but substantial tax ramifications could result upon contract lapse or surrender. Surrender charges may reduce the policy’s cash value in early years.
- It is possible that coverage will expire when either no premiums are paid following the initial premium, or subsequent premiums are insufficient to continue coverage.
- “Standard and Poor’s®,” “S&P®,” “Standard and Poor’s 500,” and “500” are trademarks of Standard & Poor’s. The product is not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation regarding the advisability of investing in this Product. The S&P Composite Index of 500 stocks (S&P 500®) is a group of unmanaged securities widely regarded by investors to be representative of large-company stocks in general. An investment cannot be made directly into an index.
- Guarantees are dependent upon the claims-paying ability of the issuing company.
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