Life Solutions

Life insurance is one of the most important components of a solid financial plan

There are many different types of life insurance available, so it’s important to know the pros and cons of each variation, and when to use one over the other. Wealth Watch Partners can help you choose the right life insurance solution for your clients. Keep in mind that as your clients move through life stages, you may need to use different solutions to address their changing needs.

Educate yourself

With so many opinions on life insurance, it’s easy to get swept away in the sea of “expert” information. Below are some excellent resources to increase your knowledge of these important financial solutions. Feel free to use this information to educate yourself and your clients on the truth about life insurance.

Helpful resources for our agents and advisors

Wealth Watch Partners can assist you with any of these, with the exception of Variable Life. In order to sell VLs, an agent must obtain the appropriate licensing, as the sub-accounts within a VL are market-based and therefore subject to market risk.

A less expensive type of life insurance that provides temporary coverage for a declared length of time: typically, 10, 15, 20 or 30 years. The insured pays a fixed rate for the length of the term. If the insured dies before the end of the term, the full death benefit is paid out to their designated beneficiaries. The coverage may be converted to a permanent policy if this feature is included. Otherwise, the coverage with expire. 

A type of flexible, permanent life insurance similar to Universal Life but with higher upside potential. The cash value grows tax-deferred at an interest rate based on the performance of stock indices-typically the S&P 500, Nasdaq, or other international indices. Fixed IULs also provide a minimum guarantee, as determined by the insurer. With the ability to participate in accounts tied to the market, this type of product has grown increasingly more popular and is mostly used for a safe way to build generational wealth or alternative ROTH IRA retirement plan.

A type of life insurance intended to cover the cost of burial and funeral expenses. Final Expense Insurance is a Whole Life Insurance plan and can be purchased later in life than most other life insurance plans. Typically, it carries a face amount between $5,000 and $50,000.

Funeral or Burial Insurance is usually a small, guaranteed issue life policy that can be assigned to a funeral home or an irrevocable funeral trust. Proceeds from the policy are typically used to cover basic funeral expenses and are paid directly to the funeral home, cemetery, or family members who have incurred funeral expenses. Plans are typically used to assist in Medicaid qualification.

A type of permanent life insurance that builds tax-free cash value. These policies come with a higher cost of insurance (COI) when compared to term insurance. Your premiums not only contribute towards your death benefit, but also to your cash value. The cash value will grow throughout the years alongside your death benefit and you will have access to it through an internal loan. Another feature that comes with Universal Life is the access to flexible premiums. This allows the insured to deviate from the planned premium whether that be more or less, so long as the minimum is not consistently met or the maximum is not surpassed. In the event of minimum premiums constantly being paid, the policy may lapse. Conversely, overfunding past the max limit may cause the policy to become a Modified Endowment Contract (MEC). A MEC will make all cash value taxable. 

Whole life insurance provides coverage for the life of the insured. In addition to providing a death benefit, whole life also contains a savings component where cash value may accumulate. Whole Life insurance policies are also known as permanent, traditional life insurance, straight life or ordinary life. Whole life insurance has fixed premium payments that typically cannot be missed without lapsing the policy, although one may exercise an Automatic Premium Loan feature, or surrender dividends to pay premiums.

A type of life insurance that builds a cash value. The cash value can be invested in a variety of separate accounts, typically mutual funds. Separate account allocation decisions will be made by the policy owner. The ‘variable’ component in the name refers to this ability to invest in separate accounts whose values vary—they vary because they are invested in stock and/or bond markets. The ‘universal’ component in the name refers to the flexibility the owner has in making premium payments. The premiums can vary from nothing in a given month up to maximums defined by the Internal Revenue Code for life insurance.