Understanding Life Insurance

The only creation of man kind, that man could not improve in 200 years, it is called “Whole Life Insurance” (Jonathan Phan)

Also known as:

  • The Best Love Letter Ever Written
  • “The Best Employee Anyone Could Hire”
  • “The Heart of Financial Planning”
  • The Swiss Army Knife of all Financial Products
  • The Path to Financial Immortality

Whole Life

Whole Life was so perfectly crafted that after a Civil World, Two World Wars, Recessions, Depressions, and many economic downturns, this product remains strongly positioned among the most comprehensive financial strategies of all times.

For those who can not afford a whole life policy for the full amount of protection they need, they should consider a combination option to supplement their protection with an additional Term Insurance Policy. This is how we arrive to our concept of maximum protection and maximum wealth accumulation according to your budget.

It is important to make sure that the Term Insurance policy has a conversion provision that allows for the policy to be converted into a whole in the future without proof of insurability should their economic conditions improve.

There are three parties in a life insurance transaction: The Insurer, The Insured, and The Owner of the policy (policyholder), although the owner and the insured are often the same person.

Another important person involved in a life insurance policy is the beneficiary. The beneficiary is the person or persons who will receive the policy proceeds upon the death of the insured.

Life insurance may be divided into two basic classes – Permanent and Term.

Permanent life insurance

Permanent life insurance is life insurance that remains in force until the policy matures generally age 121, unless the owner fails to pay the premium when due. These policies accumulate cash value. (Cash values are one of the living benefit of a life insurance policy, dollars available for future needs or wants)

Term life insurance

Term life insurance provides for life insurance coverage for a specified term of years for a specified premium. The policy does not accumulate cash value. (Cash values are one of the living benefit of a life insurance policy, dollars available for future needs or wants)

Whole life insurance

Whole life insurance Is a permanent life insurance which provides for a level premium, and a cash value table included in the policy and guaranteed by the insurance company.

The primary advantages of whole life are:

  • Guaranteed Death Benefits,
  • Guaranteed Cash Values,
  • Fixed and Known Annual Premiums,
  • Mortality and Expense charges will not reduce the cash value shown in the policy.

Universal life insurance (UL)

Universal life insurance (UL) is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for a higher internal rate of return. A universal life policy includes a cash account. Premiums increase the cash account.

If you want to buy a whole life, universal life, or other cash value policy, you should plan to hold it for at least 15 years. Cancelling these policies after only a few years, can increase your pure protection costs.

Check the National Association of Insurance Commissioners website (www.naic.org/cis ) or your local library for information on the financial soundness of insurance companies.