The most valuable life insurance policy, the only one that counts, is one in force on the day you die.

There are two main types of life insurance policies, temporary or permanent, with an option in between which will be explained later.

Let’s start with a question I am asked often. How does term life insurance work?

The explanation that seems to make sense to people is that it’s similar to renting. A term policy means it’s a temporary life insurance policy for a certain period of time. It normally ranges from a period as low as  10 years to as high as a 30 year term. The price is based mainly on your current age, sex, current health status, whether you smoke or not, and whether you participate in any risky behaviors.

Your monthly or annual premium is locked in at that time for the length of your term. At the end of that term, similarly to the end of the lease, your  premium will go up, most likely significantly. There is a cost of insurance in every  life insurance policy. The cost of insurance in a term policy is lower at the beginning of a term policy then it would be on a permanent policy because the insurance company has actuaries run the numbers on the likelihood of how many people will die at what particular ages. Out of  one hundred term policies sold, statistically less than two of those policies will result in a payout before the term expires. Make sense, that it costs less?

Most people that have term life insurance policies that were acquired more than ten years ago probably have the kind of life insurance with the only benefit being to pay somebody else when the insured dies. The life insurance industry has advanced and added additional benefits at little to no additional cost in most cases.

The more valuable kind of term life insurance, in my opinion, is a term policy with additional benefit riders, commonly known as living benefits. Please note that not all living benefit riders are created equal. Some life insurance agents say the policies they sell have living benefits when the only rider is to access a portion of the death benefit if you’re diagnosed with six months or less to live.

What I would consider a good life insurance with living benefits policy has riders that will pay to out the insured in the event they are diagnosed with a critical, chronic, or terminal illness.

As I mentioned earlier, Out of one hundred term policies sold, statistically less than two of those policies will result in a payout before the term expires. Statistically in America, 70% of people, by the time someone reaches age 65,  will have experienced some sort of heart attack, stroke, or cancer. If the life insurance policy includes provisions for pay outs due to these events it makes that policy more valuable by providing the insured options to access money and keep themselves and their families afloat with a cash infusion at a time they may be unable to work.

If someone is starting a small business in Surprise, AZ or the surrounding areas of the West Valley of Phoenix and getting an SBA loan, they will be required to get a life insurance policy and make the lender the beneficiary to make sure that loan will be paid back in the event the business owner dies before the loan is fully paid. This would be a very good use of a term life insurance policy. There may be other instances where you are in need of life insurance that is only required for a short period of time.

There are several forms of permanent life insurance for Surprise, Arizona residents to consider.

The types of policy that will be discussed here are the most common, which are universal life, specifically indexed universal life policies, whole life policies, and guaranteed universal life which can be dialed in to any age up to 120 years old. Variable life policies will not be discussed here as the potential for high fees make it less desirable for many people who want cash value growth that will not decrease due to a market downturn.

A permanent life insurance policy is meant to last as long as you do. Currently, they go all the way out  to 120 years old, based on our last census. In our “term is like a lease” example, “a permanent policy is like buying the home with the ability to build equity,” which in a life insurance plan is known as cash value. Some carriers offered living benefit riders with these plans and some don’t.

Whole life insurance policies are one of the more well known kinds of permanent plans.

With whole life your premiums are fixed and guaranteed not to rise as long as you faithfully make your premium contributions as determined.  A properly structured whole life insurance policy has the potential to accumulate cash value over time, building an amount that you may be able to borrow against. If done correctly,  borrowing from the cash accumulation would be tax free. The fact that the premiums are fixed may become a problem for someone who needs more flexibility. The premiums for the same amount of death benefit on any permanent policy will be more than the initial amount on a term policy. How many years you are required to pay for a certain death benefit can vary.

Another kind of popular permanent life insurance policy available in Arizona and the nation is called universal life policies. They offer flexible premiums that may allow you to adjust how much you’ll pay each year. There is a minimum premium amount you will be required to pay or the policy will lapse. Depending on your policies cash value accumulation, it may be used for a premium payment or left alone to accumulate over time. Universal life policies have the potential to earn more than a whole life policy.

The most popular form of universal life insurance policies is called indexed universal life, commonly called IUL. This plan provides the flexibility to adjust your premiums as well as your coverage amounts known as the death benefit. It is called indexed universal life because the cash value that accumulates is tied to an index, such as the S&P 500, Dow Jones, and or several other options. Most people that have been investigating whole life and indexed universal life tell me they find index universal life to be more transparent and flexible than whole life. The interest in a index universal life policy that’s earned accumulates tax deferred. When a policy is properly structured access to that cash value is disbursed tax free.

Lastly we will discuss the option called guaranteed universal life. This financial product varies from insurance company to insurance company. It is not meant to build as much cash value as a index universal life policy or even a whole life policy. But it is used when you want a policy that will last longer than a term life insurance policy. Some guaranteed universal life policies automatically extend out to age 120. Other companies allow you to dial in how long you want the coverage to last. Theoretically you could pick 90, 95, 100 if you like and feel you don’t need coverage for longer than that. The longer you extend out the date, the higher the premium will be because you are likelihood of seeing the payout to your family increases significantly.

Sometimes I get a call where someone with really good longevity in their family who has had a term policy which expired and now the length of another term policy they are offered is not enough to give them confidence and clarity that their family will be taken care of if they outlive the next term policy which is costing them more anyway. A guaranteed universal life policy maybe an excellent choice for that person.

With the great influx of businesses, families, and  big companies moving to Surprise, AZ and surrounding West Valley of Phoenix area, the need for a life insurance policy review is greater than ever.

Have you gotten married recently? Had a baby? Taken on a new mortgage? Gotten divorced? These are all very important times to have your life insurance policy reviewed or if you have no plan to investigate your options. Schedule time with me at www.meetwithBonnieClark.com to discuss your situation or let’s find out if I can lower your premiums, increase your benefits, or both here: https://www.kratos-financial.com/life-insurance-policy-enhancement-auditor-page