Mortgage Protection is a form of insurance designed to do one of three things.

• Pay of the entire mortgage upon the insured’s death. This option has the highest premium and will pay off the entirety of the mortgage in the case of your death.

• Pay off the partial amount of the mortgage, usually half or one quarter. This option is most common for couples who don’t need the whole payoff and want a lower premium, who just want to reduce their mortgage balance.

• Cover a few months’ worth of payments while the family puts affairs in order. This option is popular for older clients who have equity in their homes and just want to make the transition period after their passing easier for their loved ones.

Debt Free Life, or DFL, is a program to help pay off debt and begin building wealth. Primarily these are used for persons with student loans and mortgages.

 

Use the concept of infinite banking (using your own built capital to fund major purchases rather than taking out loans from banks) and organize your debts so that they can be paid off in the most efficient way possible. This is done without spending any extra money other than what is already being spent on whatever debt you’re currently paying off.

Now, that may sound impossible, but the process is almost insultingly simple. Most of us overpay our bills, at least a little bit, in an attempt to pay those debts early. This program takes that extra money from over payments and directs them into a DFL. Then it focuses on paying off major debts one at a time, rather than in small payments. After each debt is resolved the minimum payment from that debt is directed towards the DFL program.

 

This offers a couple of different benefits above self-funding large purchases, the DFL is insurance so it is tax-free (as long as it remains in force and obeys insurance laws) and will still always be insured. So, while you’re alive, it has constant utility and gains dividends, and when you pass, the face value (minus whatever loans you have against the policy) will payout to your beneficiary.

Whole Life

 

Whole life insurance is permanent life insurance. Like all life insurance, Whole Life is a Unilateral (one-sided contract) which means that the insurance company makes a promise to you, but you promise nothing to the Insurer. That’s right, all life insurance contracts are one-sided. Your payment of premiums and receipt of benefits are optional. With Whole Life, as long as you keep up with the premiums the policy remains “in force” (that term means that the policy is current and all premiums are up to date). You will be covered to receive the face benefit (the amount agreed upon) for your beneficiary, which you name when you start the policy.

 

Whole Life is typically subject to higher premiums, but the premiums are usually fixed and the face amount is also guaranteed, providing stability and predictability. There are several variants and potential add-ons that can make whole life policies versatile for the needs of anyone, from critical illness coverage to coverage for your children. Whole life also comes in two other types: Universal and Variable, let us discuss those next.

Universal Whole Life

 

Universal Whole life is permanent life insurance, similar to Whole Life, with the option for accruing cash value. As you pay your premiums, they will be added to the cash value of your UL policy. Cash value, in certain policies, will accrue dividends (interest-based on investments) and these dividends can be invested, paid out, or put towards your premiums.

 

Now, when we hear “investments” in regards to our money, there’s always the fear of loss. UL dividends are not guaranteed, but they are guaranteed to never take a loss. In 80 plus years there has only been one time where these sorts of policies lost money, back in the 1920s.

 

The second major difference is that UL insurance has flexible premiums and death benefits, meaning that they can be adjusted throughout the life of the policy based on needs or wants.

Variable Life Insurance

 

Variable Whole Life has most of the same traits as UL and traditional Whole Life, depending on the individual policy. The biggest difference being on the investment side. Whereas ULs automatically invest and deliver dividends, Variable Whole Life allows the policy holder to have a say in how that cash value is invested.

Term Insurance

 

Term insurance is the most affordable form of life insurance. “Term” refers to the fact that the insurance is contracted for a certain period of time, or for a certain “term”. These terms are typically 5-year increments with the most common being 10, 15, 20, and 30-year policies. Because they accrue no cash value, meaning the carrier has less administrative costs, the monthly or quarterly payments tend to be significantly lower on average for comparable death benefits. Term insurance can be bought on its own for clients concerned about leaving behind a legacy, or at the very least not leaving behind unwanted bills and debts but who are not concerned about getting any living returns.

 

Term insurance can also be purchased as add-ons to whole life policies for additional coverage during certain periods (such as when your children are young, or during a move or transfer to a new job or career). Term insurance lasts for its established term and then lapses at the end of said term. There are other optional aspects of Term Insurance. We will cover those in videos on the subject.

Annuities

 

Annuities are the most stigmatized of the services we can help clients with. This is due to a product called a Variable Annuity. Variable Annuities were the object of predatory selling. While they can be good investments, much like standard investing, they have a strong potential for loss, especially when poorly managed.

 

Pure Annuities, sometimes called self-funded retirement funds, are essentially the same things as UL insurance, with a few key differences. Annuities are designed to be paid up while you’re alive so you can have either a supplement to your income or pay out monthly to your beneficiary.

Children’s Whole Life

 

Protecting our children is the number one priority for every parent. It may seem like a bad omen to buy life insurance for your child, but companies like Gerber has been providing the prep plans for children for over 80 years. Getting Whole Life for a child is a great way to start developing a tax favored savings for their future, for as little as $3 a month. In addition to that, there are living benefits for children in the event that a parent passes, things like Orphan Benefits through Foresters and college allotments for children who have lost one or both parents. The bottom line is that Children’s Whole Life is not a protection against the loss of a child as much as it is an investment in that child’s future.