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Group Life policies are insurance policies offered to people who share a qualifying characteristic or membership. Most often they are offered by employers to employees. It may be offered as part of an employee benefits package or at a reduced cost. Portability- Some life policies are written for a group, but each employee owns the policy. Portable policies are available through our work-site marketing plan.
No-cost group life coverage, that is, coverage automatically supplied by the employer, is usually set at a fixed limit, anywhere from $5,000 to $20,000. These limits can be higher corresponding with your position in the company. It may also correspond to your salary, and therefore be a percentage of your yearly gross income. These policies are available to employees without requiring a medical exam, which is an attractive benefit.
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Term Life Insurance is a policy that offers coverage for a certain number of years--whatever is set out in the terms of the contract--usually from 1 to 30 years.
People usually choose this type of policy for the following reasons:
- to provide for final expenses at the time of death
- to cover a mortgage or other loan balances
- meet the needs of dependents for fulfilling educational costs
Whole life Insurance may be used as a form of investment, as it accrues interest over time.
Whole life policy premiums are divided into two parts: Death Benefit and Cash Value Account.
- Death Benefit. Part of the premium in a whole life policy is used to cover the cost of the death benefit coverage over the insured person’s lifetime. The so-called "death benefit" refers to the amount of money paid or due to be paid when a person insured under a life insurance policy dies. This is paid directly to the beneficiaries of the insured. ·
- Cash Value Account. The other part of a whole life policy is used to build a cash value account. The interest accrued by the cash value account, usually at a fixed rate, is comparable to that of a savings account. This money can usually be borrowed against or withdrawn in times of need or emergency--one of the things that make a whole life policy attractive to prospective buyers.
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Buy-Sell Agreement
Protecting your business is an essential part of preserving your estate. When an active shareholder in a business can no longer participate in the business, it's important that the other shareholders have a plan in place to continue the business. A Buy-Sell agreement ensures that money is available to buy a deceased partner's share of the business, using life insurance as the vehicle to fund this purchase.
Business partners want to ensure that if one partner dies, the other partners will be able to purchase the deceased partner's shares from the heirs and continue the business without interruption.
A Buy-Sell strategy involves a joint first-to-die insurance policy and a completed Buy-Sell agreement. A Buy-Sell agreement is like a "business will" and is a written legal document. Along with your advisor, a lawyer and accountant also need to be part of the team when setting up the agreement.
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Keyman Insurance
Keyman Insurance is a life insurance policy protecting a corporation or business from the death of a key employee, either a man or a woman. Keyman Insurance is often required by investors in a business where one or a small number of individual employees are key to the success of the venture. In other words, the investors realize that the death or disability of the key person could effectively destroy the value of their investment. With Keyman Insurance, if that key person dies or becomes disabled, the corporation usually receives the proceeds as the beneficiary of the insurance policy. The money is then available to the business attempting to overcome the loss of the services of the key employee, or to distribute to the investors upon the dissolution of the corporation.
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Estate Taxes
The federal government has set up a tax system to collect a certain amount when you die if you leave an estate over a certain amount. This tax was originally intended to prevent extremely wealthy families from holding onto their fortunes from generation to generation instead of turning assets back to the government to help run the country. With rising real estate and pension values and more people owning life insurance policies, a lot of Americans find themselves among this “elite” group. The tax rates on estates can be as high as 46% in 2006, (decreasing to 45% by 2007), potentially making the federal government one of your major beneficiaries when you die with a sizable estate.
Generally, if you have more than the applicable exclusion amount ($2,000,000 in 2006) in your estate, you may have to pay an estate tax. Whole life insurance can be a financial tool to fund this future liability.
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