Life Insurance
Protection for Your Loved Ones
What is Life Insurance, and How Can it Help?
Life Insurance is a way to keep your loved ones protected in the event of your passing. When you pass away, life insurance is there to provide your beneficiaries payments that can assist them with several expenses, including:
Mortgage payments
Credit card bills/debt
Taxes
Loans (Student, Car, etc.)
Legal fees
Funeral Costs
Child Care
There are so many ways life insurance can be useful. It will ensure that those closest to you are secure financially, that your children are supported if they choose to pursue education, that your business is given help to cover expenses and lost income, and most importantly – it helps protect the wealth you’ve accumulated during your life.
With New World Agency by your side, you will be able to confidently choose the best life insurance policy for your needs.
Term Life Insurance vs. Permanent Life Insurance
What is the difference between the two? We’re here to break it down.
Term Life Insurance:
Term Life Insurance is a temporary, more affordable coverage option where payments remain the same for a fixed term (hence the name “term”). Once the term ends, your insurance will renew automatically (depending on your age and other factors). As the insurance renews and you grow older, the cost goes up.
With term life insurance, you may also be able to switch over to permanent life insurance. This process would be simplified, as you wouldn’t have to fill out extra questions related to your health (depending of course on the conditions of your insurance policy).
In the event of your passing, while the term is active, your beneficiaries will be given the insurance payment completely tax-free.
Permanent Life Insurance:
Permanent life insurance is designed to cover you throughout your lifetime if you maintain your payments. Because it has more extended coverage, it often has a higher cost than term life insurance.
For many people, finding more ways to save money is ideal, and with permanent life insurance you can do just that. Once you’ve selected a permanent life insurance policy that best suits your needs, the cash value of the policy will grow (tax-free!), as long as it remains in the policy. It also must remain within legislative limits.
If you need to, you are able to access the cash value in your policy. Why? This is an option for those who might need to pay for something large, such as a down payment on a car or home. Permanent life insurance has different types, including universal life insurance and participating whole life insurance. To learn the difference, view our chart comparing the several different types of life insurance.
When should you get life insurance? That’s up to you!
When it comes to life insurance, it’s truly never too early to start considering the benefits it has. As a younger person, you actually have advantages with life insurance, such as:
Lower payments (in most cases)
Purchasing coverage now means you can have peace of mind if you develop health issues down the road. You won’t be rushing to get coverage!
Your policy has more time to grow. This will depend on the type of insurance you have.
Life Insurance Comparison
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Term Life Insurance |
Universal Life Insurance |
Whole Life Insurance |
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How it Works |
Temporary protection with consistent payments during the set term. |
Lifetime protection, guaranteed. The policy can also expand over time if you choose to add more money into it. Non-participating. |
Lifetime protection, guaranteed, with the added benefit of being able to grow your wealth in multiple ways. Premium payments along with payments from other policyowners are added to your account. |
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Insurance Length |
Lasts for the duration of your life. This type of policy will be renewed once the term ends up until a certain age. Plus, your coverage can be ended whenever you need, or you can switch to a different policy. |
Your lifetime. |
Your lifetime. |
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Can my Insurance be Increased? |
Yes! You’re able to add benefits (which are optional). |
Yes! You’re able to add benefits (which are optional). |
Yes, it can be. To do this, you can use policyowner dividends. |
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How to Use Your Policy Owner Dividends |
N/A |
N/A |
You may receive policyowner dividends each year, and these can be used to purchase more coverage, lower your payments (or even stop them in some cases), or you can opt to take them as cash if you are able. |
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How to Use Your Cash Value |
N/A |
Once money has grown in your policy, you can use it for several things, such as payments in the future. You can also withdraw or borrow when you need to. |
There are several ways to use your cash value with this type of life insurance. While you are still alive, you can withdraw the cash value or even take a policy loan. One huge benefit is that you don’t pay tax while your cash value expands (keeping in mind tax limits). Paying tax may come into play if you borrow or withdraw against the cash value. |
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Do my Beneficiaries Pay Taxes? |
No, they do not. In the event of your passing, the funds are sent tax-free to your beneficiaries. |
No, they do not. In the event of your passing, the funds are sent tax-free to your beneficiaries. |
No, they do not. In the event of your passing, the funds are sent tax-free to your beneficiaries. |
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What is the Typical Cost? |
This is a great option if you are in need of an affordable life insurance policy. However, keep in mind the cost rises every time the policy is renewed. |
This type of life insurance will cost slightly more than the term insurance option, but it’s still an affordable choice. You can pay either per month or per year, depending what works best for you, and you can choose to pay the minimum amount or to contribute extra money to grow your policy. You can pay off your policy costs in either 10, 15, or 20 years. Universal allows you to have your payments increase until your reach a certain age, or to keep the payments the same for the duration of your policy (payments stop at age 100). |
Similar to Universal, the cost will be higher than Term Life Insurance. With Participating, you will be required to pay premium payments for 10 or 20 years, or until you reach 100 years of age. |
Potential Dividends
For those interested in Participating Whole Life Insurance, you’ll have the benefit of dividends. What are these dividends? Basically, everyone who opts into the same type of insurance (who owns a participating policy from the same company) receives policy owner dividends every year. Please note that they are never guaranteed. However, if and when they are credited towards your policy they are completely yours!
What can you do with these dividends? You can increase your insurance coverage (get additional insurance), or lower your payments, and in some cases even stop your payments. One other option is to take these dividends as cash.
Universal vs. Participating Whole Life Insurance
Now that you’ve seen all three life insurance options, we wanted to break it down a bit further to compare Universal and Participating. These are both types of Permanent life insurance, meaning you have coverage for your lifetime, rather than just set term lengths (like you would get with Term life insurance).
Benefits of Universal Life Insurance:
If you’re looking for something cost-effective, this is a great option to choose.
Ability to build your savings and choose how you want to invest.
Money can grow tax-free within your policy; You can add stocks, bonds, equity, and more which are tax-sheltered if kept within a policy.
Choose how often you pay (monthly or yearly, but can vary), and how much and for how long you pay.
Benefits of Participating Whole Life Insurance:
Premium payments can be made for 10 years, 20 years, or until you reach the age of 100.
Policyowner dividends (see above section to learn more about this). A popular dividend type within Participating Whole Life Insurance is called ‘Paid-Up Additions’.
Cash Value builds within your policy over time. Plus, you can decide how quickly your cash value builds.
Premiums/Costs rarely, if ever, change or fluctuate with this type of Life Insurance. Minimums are guaranteed.
To learn more about each of these options, reach out to the team at New World Agency. We are more than happy to go over the details so you can make an informed decision.
Purchasing Life Insurance
When you’re ready to purchase a life insurance policy that suits your lifestyle, New World Agency will guide you through the process step by step. We help you understand the various types available to you, ensuring that you pick the best coverage option.