Assured Life Insurance: What You Need To Know

Life insurance is a vital component of financial planning, helping individuals and families deal with unexpected life events. While the terms 'life assurance' and 'life insurance' are often used interchangeably, they are distinct concepts. Life insurance is an agreement between a life insurance company and a policyholder, where the company commits to providing insurance cover to the policyholder for a specific period in return for regular payments. On the other hand, life assurance combines investment and insurance, offering a guaranteed minimum payout or its investment valuation, including accumulated annual bonuses, when redeemed. Life assurance is a valuable tool for wealth management and tax planning, providing long-term, tax-efficient capital growth. Understanding the difference between these terms is crucial for making informed decisions about financial protection and ensuring that a life insurance policy meets its intended purpose.

Life assured vs policyholder

Life assured and policyholder are two distinct roles in the context of life insurance. While they are often the same individual, they can be different people. Understanding the difference between these terms is crucial for anyone considering or already holding a life insurance policy.

Who is the Policyholder?

The policyholder is the person or entity that owns and controls the insurance policy. Their responsibilities include paying premiums, adjusting the policy, changing beneficiaries, updating the amount of cover, and even cancelling the policy. The policyholder also deals with premium payments and may take out a loan against the policy if it has a cash value component.

The policyholder holds the power to designate the beneficiaries who will receive the policy's death benefits upon the death of the life assured. They have the right to surrender, change, or cancel the policy at any time.

Who is the Life Assured?

The life assured is the person whose life is protected or insured under the insurance agreement. In the event of the death of the life assured, the insurer pays the death benefit to the designated beneficiaries. The life assured may have a say in choosing the beneficiary, but this decision is ultimately left to the discretion of the policyholder.

The life assured does not directly control the policy because they are the subject of insurance coverage. Depending on the specific arrangement, the life assured might or might not be responsible for premium payments.

Key Differences

The primary distinction between the policyholder and the life assured lies in their ownership and control over the insurance policy. The policyholder is the rightful owner and can make changes to the policy, such as modifying beneficiaries or the level of protection. On the other hand, the life assured is the insured person and does not have direct ownership rights over the policy.

While the policyholder typically maintains the policy by paying premiums, the life assured might or might not be responsible for premium payments, depending on the specific arrangement.

Life insurance for over 50s

Life insurance is a valuable tool for financial planning and security, and this remains true even for those over 50. While the specifics of policies and premiums change with age, there are still many options available for those over 50 who wish to ensure their loved ones are provided for in the event of their death.

Term Life Insurance

Term life insurance offers temporary coverage for a set period, typically 10, 20, or 30 years. If the policyholder passes away before the term expires, their beneficiaries will receive a death benefit. Term life insurance policies tend to have lower premiums than other life insurance options. However, there is a risk that the policyholder could outlive their policy.

Whole Life Insurance

Whole life insurance is a permanent policy that lasts for the entirety of the holder's life. It includes a death benefit and a cash value component, which can increase over time. Policyholders can often access this cash value while they are still alive by borrowing or withdrawing from it. However, using the cash value will reduce the overall benefit paid out.

Final Expense Insurance

Final expense insurance, also known as funeral or burial insurance, helps beneficiaries pay for end-of-life expenses such as funeral and burial costs, in-home care, and medical expenses.

Simplified Issue Life Insurance

Simplified issue life insurance does not require a medical exam, only a short health questionnaire. While this type of policy may be easier to obtain, the premiums are typically higher.

Guaranteed Acceptance Life Insurance

Guaranteed acceptance life insurance does not require a medical exam or health questions and is available to those aged 50-85 in most states. This type of insurance offers peace of mind and helps ease the financial burden of final expenses.

There are several reasons why someone over 50 might want to consider investing in life insurance:

• To provide financial protection for your family or loved ones after your passing.
• To help cover any debts, such as a mortgage, car loan, or student loans, so your family isn't left with these financial burdens.
• To ensure your business can continue after your passing, as the death benefit payout can help cover operations.
• To leave a legacy for your loved ones or important organisations, such as charities or your children's education.
• To supplement your retirement fund, as the cash value accrued from a whole life insurance policy can provide additional income.

While life insurance for those over 50 may be more expensive and more difficult to obtain, it is still a worthwhile investment to provide peace of mind and financial security for yourself and your loved ones.

Life insurance and wealth management

Life insurance is an important aspect of financial planning, helping individuals and families deal with unexpected life events. It is particularly crucial for those with young families, as their ability to earn an income in the future is often their greatest asset. The purpose of life insurance is to replace this income for dependents after the policyholder's death.

There are several types of life insurance policies, each with its own advantages and suited to different needs. Term insurance, for example, is the simplest and most affordable form, covering a fixed period, such as 10 or 20 years. Whole life insurance, on the other hand, is a permanent form of insurance with set premiums, a fixed interest rate, and a cash value component that accumulates over time. Universal life insurance is similar to whole life insurance but offers more flexibility in terms of premiums and death benefits. Variable universal life insurance allows the policyholder to decide how the cash value is invested, potentially resulting in greater returns or losses.

When it comes to wealth management, life insurance can be a powerful tool for affluent families and individuals. It can provide financial protection, facilitate wealth transfer, and serve as a tax-efficient mechanism to grow and pass on wealth. For high-net-worth families, life insurance can play a critical role in estate planning, asset protection, and business succession planning. By incorporating life insurance into their wealth management strategy, individuals can ensure financial stability for their families, preserve their legacy, and achieve a range of financial objectives.

• Tailor your insurance policy to your needs: Depending on your life stage and personal circumstances, choose the type of life insurance coverage that best suits your needs. Term policies, whole life policies, universal life policies, and variable universal life policies each have different features and benefits.
• Don't rely solely on workplace insurance: While many people obtain life insurance through their employer, it's important to have additional coverage. Workplace policies often have limited coverage and are not portable if you leave your job. Consider an individual policy outside of work to ensure your family's financial security.
• Remember the tax benefits: Life insurance can be a critical tool for high-net-worth families when it comes to tax burdens for heirs. The death benefits from life insurance are generally not subject to federal income tax, helping heirs avoid costly estate taxes and maintain their financial stability.
• Use life insurance for charitable giving: Incorporate life insurance into your charitable planning by setting up a charitable giving rider, transferring ownership of the policy to a charity, or simply naming a charity as a policy beneficiary. This can have tax advantages for your estate while allowing you to leave a lasting impact.
• Provide liquidity and protect assets: Life insurance can offer liquidity to heirs, allowing them to access funds without needing to sell complex assets, such as business interests, real estate, or illiquid investments, at an inopportune time. It can also help preserve the value of family-owned businesses during succession planning.

Life insurance and tax planning

Life insurance is an important financial planning tool that helps individuals and families deal with unexpected life events. It is also a valuable instrument for tax and estate planning, offering benefits such as tax-deferred growth, increased liquidity, and tax-free transfers of wealth.

The most direct advantage of life insurance from a tax perspective is its tax-free death benefits. When the insured person passes away, the beneficiaries receive the death benefit without having to pay any income tax, regardless of the amount. This is in contrast to other financial accounts, such as individual retirement accounts (IRAs), tax-deferred annuities, and qualified retirement plans, where beneficiaries may be taxed.

Permanent life insurance, including whole life insurance and universal life insurance, offers additional tax advantages. Whole life insurance has fixed premiums and guaranteed cash value growth, while universal life insurance provides more flexibility in premiums and potential for higher cash value accumulation, depending on market conditions. The cash value in these policies grows tax-deferred, and you only pay taxes when the funds are withdrawn. Withdrawals up to the amount of premiums paid are generally tax-free.

Permanent life insurance policies also allow for tax-free loans and withdrawals. Policyholders can borrow against the cash value of their policy without immediate tax implications, as long as the policy remains in force. This feature is particularly useful for managing estate liquidity and tax liabilities, enabling a more flexible and tax-efficient transfer of wealth to beneficiaries.

Life insurance can also help with estate equalization, which is important when an estate's assets are challenging to divide equally among beneficiaries. This is often the case when there are significant non-liquid assets, such as a family business or real estate. By providing a cash benefit upon the policyholder's death, life insurance increases the estate's liquidity, ensuring timely payment of taxes, debts, and other financial obligations without the need to sell valuable assets.

In summary, life insurance plays a crucial role in tax planning by offering tax-free death benefits, tax-deferred growth of cash value, tax-free loans and withdrawals, and enhanced estate liquidity and equalization. It is a versatile tool that not only provides financial security for loved ones but also helps optimize tax strategies and efficiently transfer wealth to the next generation.

Life insurance for families

Life insurance is a topic that many people avoid, as it can be emotional to think about leaving loved ones behind. However, the possibility of not being there for your family is precisely why you should consider life insurance.

Life insurance will secure financial protection for your family if you can't be there to provide for them. It can help replace lost income, pay off mortgages, cover childcare costs and household expenses, and provide funds for children's college expenses. It can also help keep a family business afloat or even leave behind a legacy, as the death benefit of a life insurance policy is generally exempt from income taxes.

There are several types of life insurance policies available, including term life insurance, whole life insurance, universal life insurance, and variable universal life insurance. Term life insurance offers lower costs for maximum coverage over a set period, whereas whole and universal life insurance can be more costly as they provide lifelong coverage and wealth-building potential.

The cost of family life insurance depends on various factors, including age, health status, and the size of the death benefit. The older you are, the more you are likely to pay for life insurance, so it is advisable to purchase a policy at a younger age. Gender can also affect costs, as women have a longer life expectancy and, therefore, may have lower insurance costs. Overall health considerations, including tobacco use, family history, occupation, and lifestyle, also influence premium amounts.

Tips for Getting a Family Life Insurance Policy

When considering a family life insurance policy, it is essential to think about coverage needs and length. Determine whether you need coverage only while your children are minors or if you want to cover them for their entire lives. It is also crucial to compare quotes from multiple insurers, consider your financial picture, and look at future goals and expected living cost changes.

Assured Life is a company that provides a permanent Whole Life Insurance Plan for its members and their families and friends. They also offer a flexible premium deferred annuity product and a single premium increasing term life insurance product for young people up to age 25.

Frequently asked questions