Life Insurance Made Simple
(NAPSI)-Life insurance has long been
considered a vital building block of financial security because it
protects those most important to you in the event of a death. Although
it comes in many forms, it has one core benefit: it pays an
income-tax-free death benefit directly to your beneficiary when you die.
But that's not all today's life insurance
policies offer. You can also use life insurance to reduce taxes today,
build tax-advantaged income for retirement or provide assets to offset
estate taxes.
Not as complex as it seems
Deciding what type of insurance best fits
your needs may be simpler than you think. Some of the factors that will
influence your decision are your age, number of dependents and overall
financial goals. A basic understanding of your life insurance choices
will enable you to narrow your scope.
To help you begin your research, here's
information about the two categories of life insurance-term insurance
and cash value insurance.
Term insurance provides protection for a
specific time period. If you die during that period, a death benefit is
paid to the policy's beneficiary. Generally less expensive than cash
value insurance, term insurance can be likened to renting a property.
You pay for it during the policy's "term" (for example, one, five, 10 or
15 years) and when the term expires, your coverage expires-without
building equity (cash value).
Term insurance is generally purchased to
cover specific needs; children until they are adults, a mortgage until
its paid off, or other short-term obligations.
Cashing in on cash value
Unlike term insurance, cash value
insurance can provide protection for your lifetime and-similar to owning
property-it enables you to build up cash value. This is money that you
can access for emergencies and other needs, such as college tuition or
supplemental retirement income in later years. And like term insurance,
cash value insurance also pays an income-tax-free death benefit at the
time of your death.
The most common types of cash value
insurance that people purchase are:
• Variable universal life-Typically
designed for people who have longer investment time horizons, this
insurance offers flexibility and control. When building cash values, you
get to choose which of the variable investment options you want to
invest in. Because variable investment options are similar in nature to
mutual funds and fluctuate in value with the market, this type of
insurance is better suited to couples with a higher risk tolerance.
• Variable second-to-die-Typically
used for estate planning purposes, such as passing a family business, or
other significant assets from one generation to the next, this insurance
insures two lives and pays a death benefit at the death of the second
insured. The fact that one policy covers two lives provides some premium
savings over two separate policies.
• Whole life-Generally viewed as
less flexible but secure, this insurance offers a guaranteed death
benefit and guaranteed cash values.
• Universal life-This type of
insurance offers the flexibility of variable universal life, but with a
secure fixed rate of return for consumers who prefer less risk.
To help you simplify and determine how
much and which type of life insurance best suits your financial
situation, consult with a knowledgeable financial advisor or call
American Express Financial Advisors at (800) 432-0788.
American Express Financial Advisors
Inc. Member NASD. American Express Company is separate from American
Express Financial Advisors Inc. and is not a broker-dealer. Insurance
products offered through IDS Life Insurance Company, Minneapolis, MN
outside New York, and through IDS Life of New York inside New York.
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