Life Insurance - SafeMoney.com

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how living benefits can help in retirement

Many people know about life insurance and how it may give financial protection. What about using life insurance in retirement? Just look online, and you will find all sorts of opinions on the subject.

No question about it, everyone’s retirement will be different. However, health costs may be a substantial expense for many households, as research shows. And while we all hope to get lucky and be like those octogenarians who take up running and finish a marathon, reality (and statistics) suggests we should be ready for the alternatives.

There’s good news. Consumer demands and care needs have evolved. In response, life insurance companies have come out with new-generation life insurance products – “hybrid” policies that have a death benefit, but that also let you accelerate those benefit proceeds for qualifying health situations.

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 using life insurance for college education funding

It probably wouldn’t surprise you to learn that the cost of college tuition has gone up since back in the day when you got your degree. But how much college tuition has climbed may surprise you.

According to the College Board’s "Trends in College Pricing 2017" report, students at public four-year institutions paid an average of $3,190 in tuition for the 1987-1988 school year, with prices adjusted to reflect 2017 dollars.

Fast-forward 30 years and that average is $9,970 for the 2017-2018 school year. If you weren’t a math major, don’t worry, we have a calculator. That's an eye-popping 213% increase. And that is not even taking into consideration the increased cost of room and board, not to mention everything else that causes the college cash register to keep ringing.

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a look at single premium iul

People depend on life insurance for many reasons. Some households use it for income protection, as they have children or other dependents for whom they provide. Retired and middle-aged working individuals may use it for legacy or estate planning goals. It could be part of a broader legacy or estate plan, as the tax treatment of life insurance allows for an efficient transfer of wealth to loved ones.

Depending on your goals, life insurance comes in many forms, and one is Single-Premium Indexed Universal Life Insurance. It's also known as "Single-Premium IUL," or even just "SPIUL." Let's take a closer look at this universal life insurance option and what it might have to offer.

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 how much life insurance do you really need

It's relatively straightforward to know how much insurance you might need for certain valuables, like a car or your home. But many people don't know the answer to this question: "How much life insurance do I really need?"

If you find yourself in these shoes, you aren't alone. According to a study by Life Happens and LIMRA, 40% of people haven’t bought life insurance, or more of it, because they are unsure of how much or what type to buy.

Whether you are retired or still working, life insurance can help solve for many issues. For young to middle-aged couples with dependents, it may be a source of financial protection, income replacement, or supplemental liquidity.

And for households of retirement age? Life insurance can let you enjoy tax-advantaged income, pass a legacy to heirs in a tax-efficient manner, mitigate tax burdens upon death, and even provide much-needed liquidity for post-death expenses.

Here are some helpful basics to consider as you research how much life insurance may be right for you.

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 life insurance for seniors

Millions of Americans depend on life insurance for financial protection, not to mention for many other reasons. But as people get older, insurance coverage may seem out of reach. Many seniors think they don’t have good life insurance options due to age or health.  

Even if you are in your golden years or not quite there, the good news is you do have choices. For example, there are some life insurance policies that may be bought up till age 90. That isn't the most frequent age to get life insurance for seniors, but it's helpful to know there are options for just about any life-stage. Some insurance options might also be available for those who may not be in the best health.

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what are life insurance riders updated

Life insurance isn’t a one-size-fits-all solution. You have many options to cover your needs, including the ability to purchase additional benefits on a basic life policy. These additional policy benefits are called life insurance riders.  

Some riders are automatically included in a policy at no extra cost. Other riders will require additional premium cost. Life insurance rider benefits are available for many needs, from terminal illness and long-term care costs to term insurance coverage of children or of a spouse. With that said, you must meet the conditions outlined in the rider to enjoy its particular benefit.

In some policies, you may blend different riders together, at additional cost. The riders you choose, whether included in the policy or purchased at additional cost, may be used for current or future insurance needs.

Since many life insurance riders mean additional premium to be paid, it’s prudent to be sure you don’t get too much insurance. Knowing the basics of different riders and what they offer is a good starting point. Let’s go more into that now.

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term life insurance vs whole life insurance vs indexed universal life insurance

When shopping around for a life insurance policy, you have many choices. From monthly low-cost term insurance, to more expensive but long-term coverage benefits of whole life and universal life insurance, there’s a wide landscape of options.

As you consider different selections, it’s important to understand how these types of insurance differ from another. Among permanent life insurance, two widely-purchased options are whole life insurance and indexed universal life insurance.

While term life insurance is the most straightforward, it covers you only for a short-term period. Conversely, whole life and indexed universal life policies give lifelong coverage, so long as a policy remains active.

But they are more complex, tend to cost more than term coverage, and can be better-suited for long-term objectives. With that said, the cash value component of permanent insurance may be attractive for a number of reasons, including for efficient legacy planning, tax-advantaged wealth building, and tax-deferred retirement saving.

If you’re exploring term life insurance versus whole life insurance and indexed universal life insurance, it’s prudent to be diligent. You will want to research and consider your options carefully, and to help you get started, here's a quick guide on the differences between these life insurance types.

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what is a mec

Although it’s been around for nearly 30 years, a MEC, or a modified endowment contract, can still be confusing. Let’s straighten it out. A modified endowment contract is a unique type of cash value life insurance. A life insurance policy becomes a MEC when the policy has been funded more than federal tax laws permit.

Upon changeover, a MEC loses some of the favorable tax treatment it had as cash value life insurance. For tax purposes it’s now treated like a non-qualified annuity. While the cash value does stay intact and grow tax-deferred, you will be taxed on the cash value growth upon taking withdrawals.

Depending on state laws, cash value withdrawals may be subject to state income tax, along with the federal income tax you must pay. If taken before age 59.5, an early withdrawal penalty of 10% may apply, as well.

Because of these potential tax implications, it’s important to understand MECs, their features, and their potential consequences. Here’s a look at a MEC and how it may affect a life insurance policy.

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life insurance over 70

Generally, many people think of life insurance as a “peace of mind” option. It’s a means to provide dependents, such as a spouse and children, with financial support after the primary on the policy is deceased.

That said, there are many different types of life insurance policies that are used for a variety of financial planning strategies, including retirement, tax-adavantaged wealth building, and estate transfers. While most people begin to pay into life insurance at a younger age, if you are over 70, it may still make sense to purchase a life insurance policy. In fact, depending on your goals and situation, a life policy may be a pretty helpful addition to your overall financial strategy.

Let's get into some important things to consider if you are thinking of buying life insurance at 70 or older.

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roth ira vs life insurance

In a few ways, a Roth IRA and life insurance share some similarities. They both receive tax-advantaged treatment in the IRS code. They enable efficient wealth transfers from one generation to another, and they can provide a tax-free legacy. But despite these similarities, Roth IRAs and life insurance are very different.

For one, a Roth IRA is a retirement plan while life insurance is, well, just that – an insurance product. Yet some people have been asking which of these options might be the “better” retirement planning vehicle.

However, it isn’t an “either-or” question, but rather a matter of what makes sense for each person based on their individual needs, goals, and overall financial picture. That may include planning situations in which a life insurance policy is used as a tax-advantaged growth and income vehicle alongside a Roth IRA. And maybe even some other retirement accounts!

Nevertheless, it’s important to understand the differences between a Roth IRA and life insurance – including ways the rules may apply differently to them. With that said, here's a quick look at these two options.

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why people dont buy life insurance

Lots of people agree on the importance of life insurance. But it’s something that many of us don’t own, as research indicates.

According to LIMRA, a financial research group, 30% of U.S. households owned no life insurance at all in 2016. About 48% of households, or 60 million families, had an insurance gap that averaged $200,000 from what they actually needed. Factoring in average total coverage, almost 5 in 10 families would have only three years of household income replaced by their life insurance policies.

So, what are some reasons that Americans aren’t buying life insurance?

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