Life & Disability Insurance

Life insurance is a contract between an individual and an insurance company, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. This payment, known as the death benefit, provides financial support to the beneficiaries, helping them cover expenses such as funeral costs, outstanding debts, and daily living expenses.

Life insurance can be essential for those who want to ensure their loved ones are financially protected in the event of their passing. It offers peace of mind by guaranteeing that the policyholder’s family will have the necessary funds to maintain their standard of living and achieve long-term financial goals.

Whole life insurance is a type of permanent life insurance that provides coverage for the entirety of the policyholder’s life, as long as premiums are paid. Whole life insurance policies have a cash value component that grows over time on a tax-deferred basis. Policyholders can access this cash value through policy loans or withdrawals, though doing so may reduce the death benefit. Premiums for whole life insurance are typically fixed and guaranteed not to increase as long as the policy remains in force. This can provide predictability in terms of the cost of coverage.

A whole life insurance policy is a type of permanent life insurance that provides coverage for the insured’s entire lifetime, as long as premiums are paid.

Unlike term life insurance, which only offers coverage for a specific period, whole life insurance also includes a savings component known as the cash value, which grows over time and can be accessed by the policyholder during their lifetime.

Whole life insurance policies typically have higher premiums compared to term life insurance due to the lifelong coverage and the cash value accumulation. The cash value can be borrowed against or withdrawn, providing financial flexibility for the policyholder in times of need.

Universal life insurance is a type of permanent life insurance that combines a death benefit with a savings component. It offers more flexibility compared to whole life insurance as it allows the policyholder to adjust the premium payments and death benefit over time. The savings component typically earns interest at a rate set by the insurance company. Universal life insurance can provide coverage for the entire lifetime of the insured as long as the premiums are paid.

The main difference between the two are:

1. Duration of Coverage. Short-term disability insurance typically provides coverage for a shorter period, such as a few weeks to a few months. It is designed to provide immediate financial support during the initial phase of a disability. Long-term disability insurance provides coverage for a longer duration, often until retirement age if needed. It kicks in after the shorter-term disability coverage ends.
2. Benefit Amount. Short-term disability insurance usually replaces a higher percentage of your income (60-70%) for a limited period. Long-term disability insurance generally replaces a lower percentage of your income (50-60%) but provides coverage for a longer period of time.

Waiting Period. Short-term disability may have a shorter waiting period before benefits start, such as 0-14 days after the disability occurs. Long-term disability insurance typically has a longer waiting period, often ranging from 90-180 days before the benefits begin.

Key person disability insurance is a type of insurance policy a business can take out on a key employee to protect the company in case that individual becomes disabled and unable to work. If the key person covered by the policy becomes disabled, the insurance policy provides a financial benefit to the business to help cover expenses related to the loss of that key person’s contributions or to find a suitable replacement. This type of insurance can help mitigate the financial impact of losing a key employee due to disability.

Key person life insurance is a type of insurance policy a business can take out on a key employee or executive to protect the company in case that individual passes aways. If the key person covered by the policy dies, the insurance policy provides a financial benefit to the business to help cover expenses related to the loss of the key person’s contributions or to find a suitable replacement. This type of insurance can help mitigate the financial impact of losing a key employee or executive.

 Short-term disability insurance provides financial protection by replacing a portion of your income if you are temporarily unable to work due to illness, injury, or childbirth. This type of insurance typically covers a period ranging from a few weeks to up to a year, depending on the policy terms.

 The coverage ensures that you can meet your financial obligations, such as paying bills and covering living expenses, while you recover and are unable to work. It helps alleviate the financial stress during a period of temporary disability, allowing you to focus on your recovery.

Typically, going on disability does not cause you to lose your life insurance. Life insurance policies are generally separate from disability insurance, and having a disability does not affect the validity of your life insurance coverage.

 However, it’s essential to continue paying your life insurance premiums to maintain coverage.

Some life insurance policies include waiver of premium riders, which can be particularly beneficial if you become disabled. These riders allow you to waive premium payments during a period of disability, ensuring that your life insurance coverage remains in force without the financial burden of paying premiums while you are unable to work. 

In some cases, yes, disability insurance premiums can be more expensive than life insurance premiums. This is primarily because disability insurance provides income replacement benefits that can last for several years or even until retirement, depending on the policy.

Of course, the cost of disability insurance is influenced by factors such as the policyholder’s occupation, age, health, and the coverage amount.

Life insurance premiums, particularly for term life insurance, are generally lower because they provide a lump sum death benefit rather than ongoing income replacement. Similarly, the cost of life insurance is also affected by the policyholder’s age, health, and the length of the term or the amount of coverage.

In general, if you pay for disability insurance with after-tax dollars (meaning you were not able to take a tax deduction for the premiums), any benefits you received from the policy are typically not considered taxable income.

The term “life insurance” refers to the policy itself, which is a contract between the insured and the insurance company. This contract stipulates that the insurer will pay a designated beneficiary a specified amount of money upon the death of the insured person, in exchange for the regular payment of premiums.

The “death benefit” is the actual payout that the beneficiaries receive upon the death of the insured. It is a critical component of a life insurance policy, providing financial support to cover expenses such as funeral costs, outstanding debts, and ongoing living expenses for the beneficiaries.

In other words, the death benefit ensures that the policyholder’s family or dependents are financially protected during a difficult time.

For self-employed individuals, disability insurance premiums are generally not tax deductible, but any benefits (payments) you receive from a disability insurance claim won’t be taxed like normal income. If you are a shareholder and also an employee, the corporation can deduct the premiums. Business owners may be able to deduct disability insurance premiums on their tax returns under certain conditions; if the disability insurance premiums are paid as a business expense and not part of a pre-tax plan.

Life insurance is tax deductible in some instances. If you are a business owner, you can deduct life insurance premiums you pay on behalf of your employees or corporate officers, as long as the company is not a policy beneficiary.

If anyone depends on you for financial support, you should own a life insurance policy for their protection. Dependents can be classified as children, a spouse, aging parents, or a business partner. Over the course of a policy, the cost of life insurance is much less than the amount of money (the death benefit) your beneficiary would receive if you passed away.

Affordability, Flexibility and Simplicity. Term life insurance is a popular choice for many people due to its low premiums when compared to permanent life insurance policies. You can choose the coverage period that aligns with your needs such as 10, 20, or 30 years. This flexibility lets you match the coverage duration with specific financial obligations, such as paying off a mortgage or funding your children’s education. Term life insurance is easy to understand. You pay premiums for the specified term, and if you pass away during the term, the death benefit is paid out to your beneficiaries.