Permanent life insurance has its own benefits. It is ideal when you are just starting a family. The initial payments can be high, but the long-term payment is much lower. The payout is also good. Almost all term policies expire at age 80 or 85, but permanent life insurance policies last as long as you pay your premiums. Survivorship life insurance is a kind of permanent life insurance policy, which works for those with large estates or high net worth assets.
Permanent life insurance like a second to die policyis essential because your assets will grow as you go through the years. It can result in a formidable tax liability at death. It gets a bit easier for your spouse due to the tax-free property rollover procedure. If you are married, your assets will likely go to your surviving spouse after your death, but that does not levy the taxes altogether. It is just a way of deferring the taxes till the last surviving spouse dies. If you do not want that to happen, you need a joint last to die or second to die life insurance policy.
Why go for a second to die policy and not two separate insurance policies?
Second to die policies are often much cheaper than two separate policies. The former can save you up to 40% in premium payments. This kind of a plan delays the tax payments. Years and sometimes, decades can pass between the deaths of the insured parties. It reduces the risk, and this also contributes to lenient premiums.
What happens when the surviving member wants to discontinue the premiums?
Sometimes, with peer pressure and family’s persuasion, the surviving spouse can decide to stop paying the premiums of the survivorship life insurance. That is always a risk you have to take. However, there is always a solution. There are a few second to die life insurance policies, where the payments stop upon the first death. There is no fear of lapsed payments after the first demise, and there is no chance of cancellation due to the same.
How should you plan your premium payments?
That is where most families become a little confused. So here we are trying to make sense of the pros and cons of the traditional premium payment plans.
Monthly: you can ask your insurance company to deduct your monthly premiums directly from your account. It makes the family budgeting and savings processes much easier. The chance of missing payments due to insufficient funds in your account is much lower. It is also recommended for new families where the expenses are much more in the beginning. Permanent life insurance premiums are constant. You do not have to worry about the premium amount changing over the years.
Annually: we all know this by now. Any annual premium payment saves money. Well, it is more difficult to pay a lump sum at one go and the chance of missing payment due to insufficient funds during the payment time is much higher. Nonetheless, you can save on annual payments just because you will be making only one payment a year, making it easier for the insurance company to collect the payment. We will let you in on a little secret; when paying a premium for whole life insurance, the monthly premium is never the annual rate divided by 12. It is the yearly premium multiplied by 0.09. Therefore, if you choose monthly payment over yearly payment, you should get ready to pay about 8% more for it. Even when you are paying for universal life insurance, and your monthly premium is your annual premium divided by 12, you are enjoying specific benefits. You will be able to enjoy tax-sheltered investment growth.
Can you switch from monthly to annual?
Yes! If you have a good insurance company on your side, you can always switch between monthly and annual payments. Annual payments always surprise policyholders at the most inopportune moments. Most insured people face premium payments before the holiday season or immediately before the New Year’s Eve. That can be somewhat annoying and inconvenient. You can switch your payment mode from annual to monthly or monthly to yearly, depending on what you find convenient.
In most cases, policyholders do not have an issue with paying the premiums. The problem is not missing a premium due to the lack of $10 in the bank account. Failing to pay a premium can be heckling. You will have to file tons of paperwork and pay fines for missing one payment. Always make sure your coverage stays intact, and you always pay your premiums on time.
Author Bio Kelly Wilson is an experienced and skilled Business Consultant and Financial advisor in the USA. She helps clients both personal and professional in long-term wealth building plans.During her spare time she loves to write on Business, Finance, Insurance, Marketing,Social Media.She loves to share her knowledge and Experts tips with her readers.