Life Insurance Education
want you to make the most informed decision possible when planning
for your family's financial security. Paying low premiums should not
be your only consideration when shopping for life insurance. After
all, a cheap policy may not adequately protect your family over the
long-haul. Consider the mortgage your spouse will have to pay, as
well as the cost of your children's education, childcare expenses,
healthcare, funeral expenses and so on. Expenses can add up quickly.
Consulting a licensed professional with your life insurance needs
can help ease the burden and provide peace of mind.
In addition to a snapshot of Term Life Insurance and Permanent
Life Insurance, you will also find a complete definition of each
type of life
insurance on the market today: Term Life Insurance, Whole Life
Insurance, Universal Life Insurance and Variable-Universal Life
Finally, we offer guidance on how to take the first step in planning a comprehensive life insurance solution - one that protects your family against loss if you die, but also addresses your retirement needs if you live.
Term insurance is like leasing a car. You purchase death benefits for a
specified period --usually 5, 10 or 20 years. When the period is over, it's
like turning in the leased car. The deal is done and you walk away. Term
insurance pays a specific lump sum to your designated beneficiary if you
should die during the term of the policy. The policy protects your family by
providing money they can invest to replace your salary, and to cover
immediate expenses incurred by your death. Term life insurance is best for
young, growing families, whose financial needs are especially high but who often have limited resources to cover those needs.
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Permanent, or "Cash Value," Life Insurance is like buying the car you plan to
drive forever. As long as you pay the premiums, permanent insurance stays
in force as long as you live. It provides protection for your dependents by
paying a death benefit to your designated beneficiary upon your death. In
addition, a portion of your premiums are deposited into a tax-deferred cash
value account that you can use while you are alive. Whole Life Insurance, Universal
Life Insurance and Variable-Universal Life Insurance are examples of permanent life insurance.
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What Can Life Insurance Do for Me?
Life insurance protects your family in case of your
death by providing funds to pay outstanding debts - including medical bills and taxes - as well to cover income loss. Under a Term Life Insurance contract, the insurance company promises pay your beneficiaries a sum of money in the event that you die within a period of time defined in the contract (such as 5, 10, 15, 20 or 30 years). Under a Permanent Life Insurance contract, a portion of the money you pay in premiums is invested in a fund that earns interest on a tax-deferred basis. Over time, your policy will accumulate a "cash value" that you can use during your lifetime. For instance, you can borrow against the value of your policy. Moreover, you can design a Permanent Life contract that will accumulate enough cash so as to be "paid up" by a certain age (e.g., "Paid Up at Age 65"). The premium you pay to keep a contract in force is based on the type of life insurance you buy, the amount you buy and your chance of death while the policy is in effect.
Your need for life insurance can change over a lifetime. At any
age, you should consider your individual circumstances and the standard of living you wish to maintain for your dependents. In most cases, you need life insurance only if someone depends on you for support.
Take the first step toward life insurance planning by asking yourself these questions: What are your financial assets (e.g., savings and investments)? What are your liabilities (e.g., mortgage, credit card debt, business or student loans)? What are your monthly household expenses (e.g., property taxes, homeowners insurance, utilities, groceries, cable or satellite TV, Internet access, house cleaning)? What is the monthly cost of clothing, education, sports, hobbies and private tutoring for your children?
Here is a convenient Income Replacement Calculator
to assist you in determining the amount of life insurance you need.
You are now on your way to creating a personalized life insurance plan. But wait! The happy likelihood is that you will probably live to retirement. Life insurance can help you in that event, too! Yes, your life insurance policy can actually generate monthly income while you are still alive - income that may not be subject to taxes!
What could be better? Cash for your family if you die, and money for retirement if you live!
Cash value life insurance has the potential to produce retirement income. If you want your life insurance policy to do this for you, ask yourself these questions: At what age do you plan to stop working? What about your spouse? Will you sell or keep your home? How much income will you need to maintain your standard of living at retirement? Do you contribute to a retirement or pension plan? Can you really depend on Social Security to supplement your retirement? Even if you can, did you know that you can lose Social Security benefits if your earnings exceed certain limitations? How much money are you saving each month? Could you set aside more if you put your mind to it?
One of our friendly advisors will work with you to create a policy that provides the insurance protection your family is counting on, while building cash value for retirement on a tax-deferred basis.
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Beyond the Basics
More advanced topics are featured in our library of articles, addressing insurance needs at different life stages.
Types of Life Insurance: