What About Permanent Insurance?

15 Jun What About Permanent Insurance?

Life Insurance is always about someone else or something else Examples: support for a family member or elimination of a debt. In later years, savings and planning may wipe away these obligations. But there are protection plans that last a lifetime and can provide useful benefits. The protection does not expire so the plan will cover you as long as you live. This is called permanent insurance. There are different types. Both plans have a protection component and an investment component. Universal Life plans allow you to choose investments from the insurer’s portfolio. Whole Life plans have funds that are managed by the insurer. The owner can opt to add the funds to the basic plan, increase the protection component, or can select a cash build-up in the plan. The growth of these funds is not taxed unless they are withdrawn, and there are techniques to access these values without triggering taxation.

What Can Permanent Insurance Do for Me?

With a longer life expectancy, many people are buying protection plans at older ages that provide lifetime coverage. People buy them for several reasons, as the permanent plan offers many advantages and benefits.

Insurance can provide substantial funds. Here are some scenarios where the insurance would be most helpful.

1. Create an Estate. you can direct a substantial sum to family members. For certain ‘preferred beneficiaries’ (children/grandchildren), the proceeds can be paid in cash and tax-free. If the children are minors or they are adults but spendthrifts, then you can appoint a trustee who will distribute the funds at certain ages, according to your instructions.
2. Replenish your Estate. With a longer lifespan many need their retirement funds for lasting income, medical expenses, or for prolonged personal care. Sometimes there is less money to leave to family or to grandchildren. Instead of giving whatever is left, you can designate a significant sum to them. Your gift to them can be much greater than the cost of the plan.
3. Dependent Income. when one spouse passes, there may be a reduction in pension or other retirement benefits. Proceeds of insurance can fill an income gap, so that the surviving spouse continues to have sufficient income.
4. Last expenses, taxes. It can take some time to settle an Estate, sometimes a year or two before probate is complete. Any taxes owing must be paid before completing the process. Proceeds of insurance can be paid outside the Will, with no need for probate or probate fees. Since most death benefits are paid in a few days after the claim, there is cash to take care of taxes and expenses.
5. Balancing your Estate. Splitting a property or business among siblings is a trigger for contention. where different parties get different assets, insurance can be used to help ‘equalize’ the estate proceeds and reduce disputes.
6. Cash Needs. A permanent plan builds funds that can be accessed if needed. Some plans can be leveraged. Banks have a mandate to provide these loans with the policy used as collateral. The loan can go to the borrower without attracting taxation. Usually, the loan is capitalized, so the interest payments accrue and do not need to be paid (certain conditions apply).

Everyone knows that it takes good health to buy insurance. So getting approval later in life is a challenge. However, many insurers specialize in non-medical approval. Also if you have a term policy, many are convertible to a permanent plan without medical evidence and there is still a wide range of plan choices. And there is no need to ‘pay forever’. There are plans guaranteed to be paid up in 10 or 20 years, with benefit proceeds that are payable for a lifetime.

Learn more: let’s talk, see if you need long-lasting protection, and review your options.

Joel Rose

With over 35 years of experience, Joel Rose helps families – and their businesses – to prepare for the future. He offers guidance and support to help his clients create estate plans and succession plans that meet the needs of the whole family. Through his extensive professional and personal experience, Joel is known for his compassion and his ability to find a creative solution to meet each family’s needs.