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LIFE INSURANCE
💡 What Is Life Insurance?
Life insurance is a financial protection contract between you (the policyholder) and an insurance company.
- You pay regular premiums (monthly, quarterly, or annually).
- In return, the insurance company promises to pay a lump sum (called a death benefit) to your beneficiaries if you pass away while the policy is active.
1. Term Life Insurance
- Simple and affordable.
- Ideal for income replacement during working years.
- Example: A 20-year, $500,000 term policy — if you die within 20 years, your family gets $500,000. If you outlive it, coverage ends (no payout)
2. Permanent Life Insurance
- Whole Life
- Fixed premiums, guaranteed death benefit, guaranteed cash value growth.
2. Universal Life (UL)
- Flexible premiums and a death benefit earn interest.
- Adjustable coverage
3. Indexed Universal Life (IUL)
- Cash value grows based on a market index (like S&P 500) with downside protection.
- Growth potential + safety.
4. Variable Universal Life (VUL)
- Cash value invested in market subaccounts (like mutual funds).
- Higher risk and higher potential returns
💰 Cash Value (in Permanent Life Insurance)
- A savings component that grows tax-deferred.
- You can borrow or withdraw from it for retirement, emergencies, or education.
- Loans are tax-free as long as the policy stays in force.
Example
Let’s say you buy a $500,000 life insurance policy:
- You pay $50/month for a 20-year term.
- If you die in year 10 → your family gets $500,000 (tax-free).
- If you live past 20 years → coverage ends (no payout).
If you had a permanent policy, it would:
- Stay active for your entire life.
- Build cash value that grows over time.
- Allow you to borrow from the policy later, tax-free.
🧠 Why Life Insurance Matters
- Protects your family’s financial future.
- Ensures debts and living costs are covered.
- Helps with estate planning and legacy building.
- Provides peace of mind knowing your loved ones are secure.