Frequently Asked Questions
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Life insurance is a contract between an individual and an insurance company that provides a financial payout to beneficiaries upon the insured person's death.
Life insurance can play a significant role in estate planning for several reasons:
1. Providing Liquidity: Upon the insured's death, life insurance policies pay out a death benefit that can provide immediate cash to the estate. This can be used to pay off debts, cover funeral expenses, and settle any tax liabilities, ensuring that other estate assets don't need to be liquidated quickly.
2. Estate Equalization: Life insurance can be used to equalize inheritances among beneficiaries. For example, if one child inherits a family business, another child can receive an equivalent value through a life insurance policy.
3. Funding a Trust: Proceeds from a life insurance policy can be used to fund a trust, which can then provide financial support for beneficiaries over time. This can be especially useful in managing the inheritance for minors or individuals who may not be prepared to manage a large sum of money.
4. Reducing Estate Taxes: In some regions, life insurance can be structured to help minimize estate taxes. If the insurance policy is owned by an irrevocable life insurance trust (ILIT), the death benefit may not be included in the taxable estate, potentially lowering estate taxes.
5. Charitable Giving: Life insurance can be used to facilitate charitable giving. Policyholders can name a charity as the beneficiary, allowing them to make substantial contributions upon their death.
6. Securing Business Interests: In a business context, life insurance can fund buy-sell agreements between business partners, ensuring the business continues smoothly if a partner dies.
By integrating life insurance into estate planning, individuals can ensure that their assets are managed according to their wishes and that their beneficiaries are cared for after they pass away. It's often beneficial to consult with financial advisors and estate planning attorneys to design a plan that best fits one's personal situation and goals.
There are several types, including term life, whole life, universal life, and variable life insurance.
The amount of life insurance you need will depend on factors such as your income, debts, and family's financial needs. Our agents can help you determine the appropriate amount of coverage.
Factors include age, health, lifestyle, occupation, and the chosen amount and type of coverage.
Term life insurance provides coverage for a specified term, while whole life insurance provides coverage for your entire life and includes a savings component.
Living benefits options in a life insurance policy provide policyholders with the ability to access a portion of their death benefit while they are still alive, typically in the event of certain qualifying circumstances. Here are some common living benefits options:
1. Chronic Illness Rider: Allows access to funds if the policyholder is unable to perform a specified number of daily living activities (such as bathing, dressing, or eating) without assistance due to chronic illness or disability.
2. Critical Illness Rider: Provides access to a portion of the death benefit if the policyholder is diagnosed with a critical illness, such as cancer, heart attack, or stroke. This can help cover medical costs or other financial needs during recovery.
3. Terminal Illness Rider: Offers access to a portion of the death benefit if the policyholder is diagnosed with a terminal illness and is given a limited time to live (usually 12-24 months). This benefit can be used for any purpose, such as medical expenses or fulfilling last wishes.
4. Long-Term Care Rider: Helps cover the costs of long-term care services, whether at home or in a facility, if the policyholder needs extended care. It provides financial assistance while the insured is still alive, easing the burden of long-term care costs.
5. Waiver of Premium Rider: This rider waives policy premium payments in the event the policyholder becomes disabled and unable to work, ensuring that the policy remains in force without financial strain.
6. Disability Income Rider: Provides a regular income stream to the policyholder during a period of disability, ensuring they have financial support even if they are unable to work.
These living benefits enhance the value and flexibility of a life insurance policy, providing critical financial support during times of unexpected health challenges. It's important for policyholders to discuss their options with an insurance advisor to ensure they select the benefits that best meet their needs.
Lving benefits are provided by no-additional premium accelerated benefit riders. Payment of Accelerated Benefits will reduce the Cash Value and Death Benefit otherwise payable under the policy. Receipt of Accelerated Benefits may be a taxable event, may affect your eligibility for public assistance programs, and may reduce or eliminate other policy and rider benefits. Please consult your personal tax advisor to determine the tax status of any benefits paid under this rider and with social service agencies concerning how receipt of such a payment will affect you. Riders are supplemental benefits that can be added to a life insurance policy and are not suitable unless you also have a need for life insurance. Riders are optional, may require additional premium and may not be available in all states or on all products.
Generally, life insurance death benefits received by the beneficiares are not subject to federal income tax.
The application process usually involves a health assessment, including medical exams and questionnaires.
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MTLC Insurance Associates, LLC
1188 Bishop Street, Honolulu, Hawaii 96813, United States
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