What is Life Insurance?
Life insurance is a simple answer to a very difficult question:
How will my family manage financially when I die?
Life Insurance pays cash to your loved ones after you die, replacing your income and allowing the financial plans you put in place to continue uninterrupted.
Why do I need Life Insurance?
Life Insurance is an essential part of financial planning. One reason most people buy life insurance is to replace the income that would be lost with the death of a wage earner. The cash provided by life insurance helps ensure that your dependents are not burdened with significant debt when you die. Life insurance proceeds could mean your dependents will not have to sell assets to pay outstanding bills or taxes. An important feature of life insurance is that in most situations income tax is not payable on proceeds paid to your beneficiaries.
How much life insurance do I need?
Before buying life insurance, you should assemble personal financial information and review your family's needs. There are a number of factors to consider when determining how much protection you should have. These include:
Any immediate needs at the time of death such as final illness expense, burial costs, and estate taxes.
Funds for a readjustment period, to finance a move or to provide time for family members to find a job.
Ongoing financial needs such as monthly bills and expenses, day-care costs, college tuition or retirement. We can help with this!
What type of Life Insurance?
After you have determined that you need life insurance and calculated how much coverage you require, you will need to decide on what type of life insurance you need. Generally, there are two types of life insurance products:
Term life insurance is often referred to as "pure insurance" because it involves only the payment of a premium in exchange for a promise to pay a death benefit in the event of your death while the contract is still in force.
Term life insurance
Provides protection for a specified maximum period of time and is usually renewable at the end of each period at progressively higher premiums. As you get older, your risk of dying increases, so the cost of term insurance goes up. Term insurance carries no cash value element, making it initially less expensive than permanent alternatives. The longer the guaranteed term, the greater the initial premium, but the longer the premium stays fixed. In most cases, if you know you will need your term insurance for a long period of time, a level term policy will prove less costly than an annual renewable term policy.
Permanent Life Insurance
As the name implies, permanent (cash value) insurance is best suited for the individual with a long term (often indefinite) need. A permanent policy is really a combination of "pure insurance" and a cash value component. Premiums are considerably higher than term rates in the beginning years and may include an increasing death benefit, a "cash value" associated with the policy, and tax-advantaged borrowing privileges against your cash value.
There are two basic types of permanent insurance. Each has its own benefits and disadvantages which must be weighed carefully.
Whole Life Insurance
A form of permanent life insurance, whole life insurance features guaranteed premiums, death benefits, and cash value. Whole life insurance policies also give you the potential to receive dividends, which can increase the value of the policy when the insured is living or provide an increased death benefit for your beneficiaries.
Initial premiums are higher compared to term insurance premiums, but eventually, they may become lower than the premiums you would pay if you had kept renewing a term policy.
Universal Life Insurance
Today’s Universal Life policies provide the flexibility to build your policy's cash value or focus more on guaranteed protection (no lapse guarantees).
Choose from two policy designs:
Guaranteed Protection lets you choose the length of the protection guarantee and the premium payment schedule up front-both are then guaranteed not to change so long as the premiums are paid as planned.
Cash Accumulation allows you to change, within limits, your premium payments, and death benefits. It also allows you to set aside additional money in a tax-deferred way to help you meet long-term financial goals.