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Navigating life insurance

Jeffrey Apps and Tracy Tutag

Comprehensive financial planning is just that comprehensive and includes such things as estate planning, emergency funds, disability income protection and life insurance. Of all the topics we discuss with clients, life insurance is among the most confusing. Life insurance isnt something we think about every day but there are times when it is unavoidable. You may get married (again?) have children or experience some other significant change in your life. If youre thinking about life insurance for the first time, you may be getting conflicting advice about what kind of insurance to buy. Some people are telling you to buy permanent life insurance. This is the kind of insurance that comes with both, a death benefit (the primary reason for life insurance) and a savings component, known as the cash value. There are several types of permanent life insurance including whole life, universal life and variable life. All permanent insurance offers lifetime protection of the death benefit and the potential for cash accumulation. Lets go over these features.A lifetime of death benefit protection Once you have purchased the policy and keep it in force by either paying the requisite premium or making sure there is sufficient value to support the monthly charges, it is good for your entire life, i.e. permanent. No matter what may happen to your health, you can be covered, generally up to age 100. You will not need to renew your coverage at a later date.The potential for tax-deferred cash accumulationThe cash value component of permanent insurance appeals to many. If your protection needs diminish over time or you need cash, you can access the cash value through withdrawals or loans which may be tax free.* Whole life and universal life offer some guarantees** , while the return on variable life insurance will depend on the performance of the investments you choose, which are not guaranteed. So, depending on the type of policy you chose, as well as the premiums you contribute and the expenses, your cash value will be affected accordingly.***What are the terms on term insurance? Term insurance offers a death benefit only there is no cash value. When youre young, term life insurance is generally less expensive than permanent life insurance, because it only covers you for a stated term, such as one, five, 10 or 20 years. When the term is up and you wish to renew, you will generally have to pay more. If your health declines, renewal of your coverage will not only be more expensive, it may even become more difficult to purchase.Lifelong solutionWhats the solution? For many people, universal life insurance may be the answer. Universal life insurance is a type of permanent insurance. It offers all the benefits of permanent insurance, plus several additional advantages. First, its flexible, giving you the choice of level or variable death benefits and the ability within limits to increase or decrease the death benefit to meet your changing needs. Second, policies offer a guaranteed** minimum interest rate for the cash value. Third, premium payments are flexible so you can design them to fit your budget. As long as there is sufficient cash value to support the periodic charges, you can choose the amount and timing of your premium payments. Lastly, newer policies offer the ability to guarantee** no-lapse protections an important feature guaranteeing your death benefit for your beneficiaries. If you werent already confused read the following footnotes!*Loans and withdrawals reduce the policys cash value and death benefit, and increase the chance that the policy may lapse. If the policy lapses, matures, is surrendered or becomes a modified endowment contract, the loan balance at such time would generally be viewed as distributed and taxable under the general IRA rules for distribution or policy cash values.**Guarantees are based on the claims-paying ability of the issuing insurance company.***Unless a no-lapse guarantee has been established and is paid, investment option and performance that is less than expected could reduce the death benefit. This may also cause the policy to lapse and it may force the policy owner to contribute additional premiums above the planned premium to keep the policy in force.Is universal life insurance right for you? It depends on your circumstances, your budget, and your needs. Talk to a financial professional for a complete evaluation of your protection needs. Jeffrey Apps & Tracy Tutag offer securities and investment advisory services through AXA Advisors, LLC (member NASD, SIPC) 1290 Avenue of the Americas, New York, NY 212-314-4600 and offers annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC and its subsidiaries. They can be reached at 926.6911 or tracy.tutag@axa-advisors.com.Vail, Colorado


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