Life insurance is a unique asset and is favorably treated in our legal system for both tax purposes and for bankruptcy. Unfortunately, life insurance is often misunderstood by many Americans. Life insurance is essential to any financial plan. Life insurance may be used for risk management or for an endowment providing tax free cash flow to supplement retirement income. Life insurance may have increased importance to protect trust income form high tax rates if some version of Build Back Better becomes law.

To help you understand life insurance basics we have created this checklist to cover some of the key considerations.

Learn More

Types of Life Insurance



Term Insurance is the most affordable type of insurance when initially purchased, is designed to meet temporary needs. It provides protection for a specific period of time (the "term") and generally pays a benefit only if you die during the term. This type of insurance often makes sense when you have a need for coverage that will disappear at a specific point in time. For instance, you may decide that you only need coverage until your children graduate from college or a particular debt is paid off, such as your mortgage.


Loans, credit card debt, estate costs, the funeral... most people leave behind unpaid expenses when they die, expenses that, if left unattended, burden their families tremendously. Final expense coverage is life insurance that pays off these debts, ensuring that everything will be taken care of if you pass.



Universal Life Insurance was created to provide more flexibility than whole life insurance by allowing the policy owner to shift money between the insurance and savings components of the policy. Premiums, which are variable, are broken down by the insurance company into insurance and savings, allowing the policy owner to make adjustments based on their individual circumstances. For example, if the savings portion is earning a low return, it can be used instead of external funds to pay the premiums. Unlike whole life insurance, universal life allows the cash value of investments to grow at a variable rate that is adjusted monthly.


Indexed universal life (IUL) insurance policies can help you to build wealth while leaving behind a death benefit for your loved ones. These policies put a portion of the policyholder’s premium payments toward annual renewable term life insurance, with the remainder added to the cash value of the policy after fees are deducted. On a monthly or annual basis, the cash value is credited with interest based on increases in an equity index.



Whole Life Insurance is a life insurance contract with level premiums that has both an insurance and an investment component. The insurance component pays a stated amount upon death of the insured. The investment component accumulates a cash value that the policyholder can withdraw or borrow against. As the most basic form of cash-value life insurance, whole life insurance is a way to accumulate wealth as regular premiums pay insurance costs and contribute to equity growth in a savings account where dividends or interest is allowed to build-up tax-deferred.


Funeral Trust Life Insurance is usually a guaranteed issue whole life policy not to exceed $15,000 owned by an irrevocable trust and is paid directly to a funeral home. In most states the face amount is exempt from Medicaid “spend down.”



Irrevocable Estate Trust with Life Insurance usually provides a guaranteed issue whole life insurance policy up to about $100,000 and is paid within 24 hours of receipt of a death claim but without a death certificate (which follows in due course). This product provides instant liquidity which allows the executor or administrator the necessary cash while waiting for other assets to liquify the estate. The trust is subject to the five years look back rule for Medicaid exempt status.