Life insurance which provides coverage for an individual’s whole life, rather than a specified term. A savings component, called cash value or loan value, builds over time and can be used for wealth accumulation. Whole life is the most basic form of cash value life insurance. The insurance company essentially makes all of the decisions regarding the policy. Regular premiums both pay insurance costs and cause equity to accrue in a savings account. A fixed death benefit is paid to the beneficiary along with the balance of the savings account. Premiums are fixed throughout the life of the policy even though the breakdown between insurance and savings swings toward the insurance over time. Management fees also eat up a portion of the premiums. The insurance company will invest money primarily in fixed-income securities, meaning that the savings investment will be subject to interest rate and inflation risk.

Life insurance which combines the low-cost protection of term insurance with a savings component that is invested in a tax-deferred account, the cash value of which may be available for a loan to the policyholder. Universal life was created to provide more flexibility than whole life by allowing the holder to shift money between the insurance and savings components of the policy. Additionally, the inner workings of the investment process are openly displayed to the holder, whereas details of whole life investments tend to be quite scarce. Premiums, which are variable, are broken down by the insurance company into insurance and savings. Therefore, the holder can adjust the proportions of the policy based on external conditions. If the savings are earning a poor return, they can be used to pay the premiums instead of injecting more money. If the holder remains insurable, more of the premium can be applied to insurance, increasing the death benefit. Unlike with whole life, the cash value investments grow at a variable rate that is adjusted monthly. There is usually a minimum rate of return. These changes to the interest scheme allow the holder to take advantage of rising interest rates. The danger is that falling interest rates may cause premiums to increase and even cause the policy to lapse if interest can no longer pay a portion of the insurance costs.

A major focus for many families during financial planning is life insurance. The loss of one spouse in a two-income family can be financially and emotionally devastating. This is very, very true. However, a lot of people forget or ignore disability insurance which can be just as crucial. The simple face is you are much more likely to be disabled than killed – where disability is defined as being out of work for longer than 90 days. While disability isn’t exactly a fun thing to think about, it is something we all need to take some time to look into.

Equity indexed life insurance, like all permanent life insurance, currently offers three distinct tax advantages that in combination are not found in any other insurance or cash accumulation product.

• Tax deferred accumulation of cash values
• Potential for tax managed income for retirement or college planning
• Tax free proceeds transferable at death

Equity indexed universal life insurance offers a unique combination of affordable life insurance with the ability to accumulate cash values that grow with the upward movement of a stock index without the normal downside risk associated with the equities market. Combine the benefits of upside cash value growth potential with the tax deferred benefits associated with life insurance and a minimum guaranteed interest rate and you have an optimum vehicle for accumulating cash.

Whether you objective is to obtain a flexible low cost life insurance policy, to maximize retirement income in the most tax efficient way or to provide liquidity in estate planning, equity indexed life insurance can help you reach your family and business objectives.