William Penn Life, 2017 (52. évfolyam, 1-12. szám)
2017-05-01 / 5. szám
Moneywise with Bob Bisceglia, National Sales Director Let's talk about life insurance WHAT'S THE FIRST THING that comes to mind when someone mentions the phrase "life insurance"? Most people will either yell "YUCK!", start snoring or change the subject. That's because life insurance can be one of the most confusing subjects in today's financial world. So, what do you know about life insurance? If you're one of the people who believes life insurance is nothing more than a scam, a waste of money or only good for when someone dies, it could be because you have been misinformed, simply don't understand all of the benefits of life insurance, or both. Let's explore some of the basics. Here are a few things that many people don't know about life insurance: • Life insurance has many living benefits. Depending on the type of coverage you own, many certificates today provide much more than just a basic death benefit. Your certificate may grow a cash value or accrue dividends that can be accessed at some point in the future through a variety of withdrawal methods. Did you know that life insurance companies pay out more money in living benefits than in death benefits? • Life insurance is tax free! A huge benefit to estates and beneficiaries is that life insurance death benefits are totally income tax free. At the very least, cash accumulating within a whole life certificate grows tax deferred, similar to an annuity. As long as the cash buildup stays within the policy, it will not be taxed. Additionally, there are a number of ways to access the cash value of a life insurance policy without ever having to pay any tax. • Life insurance is a great retirement supplement. Perhaps you have a 401K, IRA and a pension pian. There is nothing wrong with having tax-qualified plans, but there are restrictions and tax issues on these types of plans that don't apply to life insurance. For example, there are contribution limits on your IRA, 401K and pension deposits, as well as strict penalties for early withdrawals. There's even a penalty if you have accrued too much in your retirement assets or don't take enough out when you are required to. None of these restrictions apply to life insurance. • Your life insurance contract can be converted to provide a lifetime income. Many people today drain their 401K and IRA accounts within seven to 10 years of retiring. Then what? Many rely solely on Social Security. What if there was a way to structure your retirement income so you never ran out of money? A properly structured life insurance policy, coupled with an annuity, can provide that assurance. This means that regardless of retirement age, it is entirely possible to have a lifetime income that cannot be outlived. • No IRS limits on contributions. As stated above, many of the restrictions on qualified plans do not apply to life insurance, including the maximum contribution limits. Assuming you are insurable and can purchase life insurance at your age, you are only limited by the amount of premiums that you can afford to fund your policy. If you are uninsurable or need more flexibility in premiums, then an annuity or a combination of life insurance and an annuity might be better for you. • There are no penalties for accessing your cash values. As your certificate ages, it grows a cash value. Similar to the equity in your home, your life insurance certificate creates an asset that can be borrowed against at any time. Certificate loans are similar to home equity loans in that there is an annual interest charge. Another option today is to pledge the certificate as collateral to obtain a lower interest bank loan. Either way, there is true value in having cash available within your certificate. What happens if the loan is not repaid? Any outstanding balance is deducted from the death benefit when the insured dies. This means the loan might never have to be repaid - and also that there would be no taxation on the loan proceeds while living or after death. • No age limit on accessing the cash values. Again, assuming insurability, anyone of any age can own a life insurance certificate (special rules apply to minor children of course) and have access to the policy values up to the full surrender amount. It's possible to purchase a certificate for a newborn grandchild and have that certificate's value available for their college education, wedding, new 6 0 May 2017 0 WILLIAM PENN LIFE Illustration © Can Stock Photo Inc./vaeenma
