The Life Insurance Advantage

Why Life Insurance is Important

Protect your family Leave a legacy Pay off debt Tax-free strategy to supplement

retirement/college planning Portfolio diversification Living Benefits Peace of Mind

Term vs. Permanent Insurance

Term Insurance: Life insurance that provides coverage for a specified term (years). There is no cash value, or investment portion. Premiums are lower than permanent insurance.

Permanent Insurance: Life insurance that is permanent! Assuming that all premiums are paid, the timing of death does not affect whether the policy will pay out or not. There is cash value growth that can be invested in different ways.

Different Types of Permanent Life Insurance

Whole Life Insurance- Permanent insurance that builds cash value. Premiums and death benefits are locked in for a specified period of time. Policy owner can not switch premium amount or death benefit. Cash value is credited at a declared rate of interest.

Universal Life Insurance- Permanent insurance, similar to whole life insurance. Premiums and death benefits are flexible and adjustable. Cash Value is credited at a declared rate of interest.

Different Types of Insurance (cont.)

Variable Life Insurance- Permanent Insurance in which cash value participates in the stock market. Cash value and death benefit may increase or decrease accordingly.

Index Universal Life Insurance- Permanent insurance in which cash value is credited based on an index’s performance, with a floor and a cap. It has the security of a traditional universal life policy, as well as the potential to participate in stock market gains like a variable life insurance policy.

A quick example of how the cash value in the IUL is credited

Last year Joe purchased the Builder IUL 7 from North American Insurance Company which has a floor of 0% and a cap of 13.5%.Joe has decided to have his cash value account linked to the S&P 500.In year 1 of the policy, the S&P grows at 15%. Because the cap is at 13.5%, Joe’s cash value is credited 13.5%.In year 2 of the life of the policy, the S&P grew 10%, Joe’s cash value was credited 10% for that year. In year 3 of the life of the policy, the S&P dropped by -25% for the year. Joe’s cash value in the policy was then credited 0% and did not lose value.

Real-life Example(foxbusiness.com)

Tax-Advantages

A loan taken from a life insurance policy that is not classified as a modified endowment contract under IRC Section 7702A is not includable in income because it is not treated as a distribution under IRC Section 72.

Living Benefits

Chronic Illness Rider- The owner qualifies for this benefit if a physician has certified that the insured is chronically ill.

Terminal Illness Rider- The policy owner qualifies for this benefit if a physician has certified that the insured is terminally ill. Depending on the policy, the insurance policy will

accelerate a portion or all of the death benefit. Each company has different stipulations in place.

Leaving a Legacy Behind

Life insurance death benefits are generally not taxable Estate planning Family protection Financial flexibility Peace of mind knowing your family and loved ones won’t

be burdened with additional financial pressure.

Financial Flexibility

Premiums paid are not married to a specific cause. Money will grow and can be used for anything you desire. Not like a 529 plan where if proceeds are not used for school

you lose tax advantage. Not like a traditional IRA/401k in which you have to wait until

age 591/2 to access the capital. No contribution limits!–- When structured properly, you may

contribute as much as you would like (unlike IRA’s and 401k’s)

The Verdict

You will leave a legacy behind that gives you the owner financial flexibility to use the cash value for college, bills, disposable income or anything you desire.

With life insurance, you will further diversify your portfolio with a product that provides protection to you (living benefits) and your family (death benefit).

You will have a tax-free income strategy that will grow at impressive rates without market risk resulting in 25-40% more in usable income.