Legacy, Legacy, Legacy: Planning With Life Insurance (Part II)

Posted by Nadia C. Vanderhall in Life EventsOctober 30, 2020(Last Updated December 29, 2022)3 min read
Key Takeaways
  • At the end of Part 1,  the four (4) types of Life Insurance to consider when building your Legacy Plan were discussed.
  • Knowing and understanding different types of life insurance is important as they can help you if certain emergencies pop up.
  • If you wish to continue reading, then go to Part 3 of this article.
Are you ready to make some real money moves?

At the end of Part 1, I started to discuss the four (4) types of Life Insurance to consider when building your Legacy Plan.

 

“Watch the breakdown” - Drake "Nice for What"

 

Term Life Insurance

 

This is often the more affordable out of the four all of these options! Depending on your policy’s riders, you could not receive any death benefit if you outlive it. For some term policies within the life of the policy, a term life insurance may be convertible to a whole life insurance policy. This is known as a “term conversion.“ The value of the term conversion is that no further underwriting is needed to convert the policy to a whole-life policy.

 

Whole Life Insurance

 

Just as the name says, this type of policy is intended to last for your ‘whole life.’ Whole life insurance generates cash benefits, and they are also eligible to receive dividend payments. Whole life insurance policies also allow for loans to be taken against the policy's cash value. You could also take out loans that can be taken for any reason and can be paid back. These types of policies can even be used as funds for generational trusts.

 

Universal Life Insurance

 

While this type of policy sounds super fancy, the difference between whole life insurance and universal life insurance is that universal life insurance has a flexible premium structure. If you are looking for flexibility within your legacy planning, this is a policy to peep out. This policy also has a cash-value account, but the insurance charges are pulled from the cash-value account each month. Any amount paid into the policy above insurance costs is added to the cash value. The cash value then grows at a rate determined by your carrier’s performance and interest rates, with a guaranteed minimum of 2% annual growth. Dope, right? Like ‘Whole Life,’ you could also surrender it for cash value or loans and withdrawals.

 

Variable Universal Life Insurance

 

The only big difference between Universal Life and Variable Universal Life is that variable universal life insurance has a cash value account that does not pay a fixed or guaranteed rate of return. Dassit. The cash value is invested in variable “sub-accounts” within the life insurance policy. These sub-accounts are essentially mutual funds, which represent investments in different asset classes. You can decide which account types your policy is tied to. 

 

The growth (or loss) of the cash value depends on the market performance of the variable accounts. Depending on how the market performance determines how your sub-account grows. Risk factor here. Variable life insurance policies allow you to take out loans or withdrawals, and the policy can be surrendered for its cash value at any time.

 

chris rock

 

Depending on how you layer your Legacy Plan, you could find yourself using multiple of these legacy vehicles to help your family drive into a better future. Even if you may not have the wealth of those we read about online, you can use them as leverage to build your own plan for future generations to expand. Even creating a “Trust” is something impressive to do. Hey, did you know that a couple of Family Trusts were some of the early investors in companies like Uber?

 

To continue reading this article, check out Part 3.

 

The original article was previously published on Nadia C. Vanderhall’s website. Edits were made for CapWay posting.

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