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Life Insurance, Risk Management | Gulfport, MS
Many people instantly think of covering final expenses as a reason for purchasing life insurance. It is true that life insurance can provide death benefit protection that passes to beneficiaries generally income tax free, but it can do so much more.
Types of Life Insurance
Term Life Insurance:
Term life insurance policies provide affordable, temporary coverage. Term policies contain no cash value and are designed for death benefit protection only. The premiums may be level for the first 10, 15, 20 or 30 years, depending on the policy selected. Because the death benefit protection is for a limited period, the premium is often the lowest of all types of life insurance policies. However, after the level term period, premiums go up significantly and increase annually.
Whole Life Insurance:
Whole life is the traditional form of permanent life insurance. It provides the certainty of level premiums, a guaranteed interest rate and a guaranteed death benefit. Whole Life provides the extra security of guaranteed protection at affordable rates, yet it includes the element of cash value accumulation.
Universal Life Insurance:
Universal life is a flexible premium, adjustable life insurance product that provides you with the flexibility of choosing the policy features that are appropriate for you and adjusting those features as your financial priorities and needs change. Policy cash value that grows on a tax-deferred basis.
Indexed Universal Life:
Indexed universal life is a version of universal life that combines death benefit protection with the opportunity to grow cash value through an account that credits interest based upon the upward movement of stock market indexes – without the risk of investing directly in the market. The Index Account features a zero percent floor which guarantees your account won't earn less than zero percent due to poor market performance.
How to use an IUL as tax-free retirement savings strategy
Who benefits most? The short answer: High earners who are frustrated with the inflexibility of their other tax-deferred accounts.
It’s a fact: Any client with a large IRA has a tax problem. If they don’t use it or leverage it, they will likely lose a significant portion to future taxes. A properly designed, Indexed Universal Life Insurance (IUL) policy offers tax advantages no other single product can provide. It would take a combination of investments to equal all the advantages of an IUL.
IRS-approved tax advantages
With an IUL, there are no taxes due during the accumulation phase when the policy’s cash value builds up. When your client retires, they can take tax-free distributions of the cash value. IULs also allow the tax-free exchange of one policy for another without triggering income taxes. And when your client passes on, the tax-free death benefit protects their loved ones against financial uncertainty.
Protection against stock market volatility
An IUL provides market-linked gains without market-based risk because it’s not an investment in the stock market. With an IULs principal-protection guarantee, gains from the previous year are locked in and the principal cash value remains the same. To put it simply, even if the stock market crashes, there are no losses.
Flexibility and control
Unlike an IRA or 401(k), there are no limitations on the amount your clients can contribute annually to their IUL. As a result, the IUL can have a high starting cash-value based on what they contribute to the policy.
Even better, your clients can have access to their cash value at any age, any time, for any reason, without paying taxes or penalties. IULs also allow a tax-free exchange of one policy for another, plus the flexibility to change death benefit amounts, premium amounts and payment frequency.
Who benefits most?
The short answer: High earners who are frustrated with the inflexibility of their other tax-deferred accounts. It’s also an excellent option for clients who have maxed out their retirement accounts or find themselves limited in the amount of tax-deferred income they can contribute to their 401(k)s. An IUL is also ideal for clients who earn too much to qualify for a Roth IRA.
For younger clients, an IUL provides a great rollover solution when they’ve accumulated considerable savings in a former employer’s retirement plan. For baby boomers who have been delaying retirement planning longer than they should, an IUL can provide a last chance to secure their retirement years. Of course, the tax-free death benefit offers an advantage to primary wage earners who are concerned about protecting the financial security of loved ones after they’re gone.
The most cost-effective way to protect their retirement savings
These days, most clients, if not all, are highly concerned about rising taxes and future market fluctuations eroding their retirement savings. Indexed Universal Life Insurance is a cost-effective way to protect their savings from taxes while providing them with supplemental retirement income for their entire lifetime.
There’s another benefit that warrants a mention here. With an IUL, your clients are in control of their own retirement savings and taxes, not their fund managers.
Steps to building a customized Life Insurance plan in Gulfport, Biloxi, Long Beach, Ocean Springs, Hattiesburg, Jackson & Pascagoula, Mississippi as well as Texas, Louisiana, Alabama, Tennessee & Florida.
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