Life insurance is purchased for many reasons. Please take a moment
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comparing the top life insurance carriers. We continue to stay abreast with the changing market place to
accommodate our clients with highly rated insurance companies. Here is a
partial listing:
Life Insurance Carriers
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helpful articles for better understanding Life Insurance:
How Much Life Insurance Do
You Really Need?
Understanding Term Life Insurance
Permanent Insurance: An
Overview
How Much Life Insurance Do
You Really Need?
Some people equate life insurance with tragedy and death. In truth,
life insurance is for the living. Without it, the sudden demise of a
key breadwinner could leave a family stranded without the resources
to maintain their lifestyle - or even retain their home.
Not so long ago, experts recommended that families carry a life
insurance policy with a death benefit of between five and seven
times their annual household income. Today, however, in light of
rising house prices in many parts of the country and spiraling
college costs, most advisors now recommend eight to 10 times income.
Unfortunately, most American families are underinsured. According to
statistics from industry research and consulting firm LIMRA
International, the average American household carries just $126,000
in life insurance - approximately $300,000 less than they actually
need - and only 61% of adult Americans have life insurance
protection, a decline from 70% in 1984.1
A Cornerstone of Sound Financial Planning
Financial experts generally consider life insurance to be a
cornerstone of sound financial planning, for two key reasons. First,
it can be a cost-effective way to provide for your loved ones after
you are gone. And second, life insurance can be an important tool in
the following ways:
1. Income Replacement
-- For most people, their most valuable economic asset is their
ability to earn a living. If you have dependents, then you need
to consider what would happen to them if they could no longer
rely on your income. A life insurance policy can also help
supplement retirement income, which can be especially useful if
the benefits of your surviving spouse or domestic partner will
be reduced after your death.
2. Pay Outstanding Debts
and Long-Term Obligations - Without life insurance,
your loved ones must shoulder burial costs, credit card debts,
and medical expenses not covered by health insurance using
out-of-pocket funds. The policy's death benefit might also be
used to pay off a mortgage, supplement retirement savings, or
fund college tuition.
3.
Estate
planning -- The proceeds of a life
insurance policy can be earmarked to pay estate taxes so that
your heirs will not have to liquidate other assets to do so.
4. Charitable
Contributions -- If you have a favorite charity, you
can designate some or all of the proceeds from your life
insurance to go to this organization.
Determining how much life
insurance coverage you need is a four-step process:
Step 1: Determine Your
Family's Short-Term Needs
Short-term needs are financial obligations and/or
expenses arising within six months of death. Examples of
short-term needs include expenses you pay now such as:
- Loan balances (automobile
loans, etc)
- Outstanding credit balances
(credit cards, revolving lines of credit, etc)
- Mortgages (first and second
mortgage, home-equity loans, lines of credit)
Add to these current expenses
any death-related expenses that must be paid in the short term:
- Funeral expenses
- Final medical costs
- Estate settlement costs and
probate
- Estate taxes due
- Charitable bequests you
would like to make upon your death
If you don't already have one,
your survivors should be left with a liquid emergency fund
sufficient to get them through any unexpected financial needs.
Most advisors recommend between three and six months' worth of
living expenses.
Step 2: Determine
Long-Term Needs
In addition to covering your
survivors' short term needs, some level of monthly income will
be needed to maintain their current standard of living and meet
financial goals such as saving for retirement and funding
college for children.
The value of these future
obligations is discounted back to present value amounts to
provide a dollar amount that, if invested, could provide an
adequate income stream to fund all of your long-term goals.
Step 3: Calculate Your
Total Available Resources
By this point, you should have a
good idea of your family's total cash needs in the event of your
untimely death. With any luck, you have already begun to set
money aside to cover some of these costs. Other resources that
may be available to your family include pensions, annuities,
funds from retirement accounts, employer-provided life
insurance, and Social Security.
The Social Security program
offers benefits to survivors under age 17, and those whose
spouses were receiving retirement income from Social Security
can also count on survivorship benefits.
The total value of these future
resources is discounted back to present value amounts. This
gives us a single dollar amount that we can use to offset your
total needs.
Step 4: Provide Funds To
Cover A Shortfall
In most cases, comparing total
needs to total resources will result in a shortfall. That's
where life insurance comes in. Without it, your survivors will
be left with the choice of either finding or creating additional
resources (such as having the surviving spouse return to work)
or experience a decline in the quality of their lifestyle.
Life insurance is uniquely
suited for covering such a shortfall. It is a means of sharing
the financial risk of premature death with many, many others who
have similar concerns.
You pay a relatively small
premium to an insurance company in exchange for their promise to
pay your beneficiaries a specified death benefit in the event of
your death. You may find it ironic that a financial need arising
from death can be alleviated by a financial resource that is
created after death. That's why life insurance, although
something no one hopes to ever need, is indeed for the living.
It's also a vital issue we can help you investigate in greater
detail to ensure your family's financial future will be
protected.
1. "Life Insurance Awareness
Month," LIMRA International, August 2004
Material discussed is meant
for general illustration and/or informational purposes only and it
is not to be construed as tax, legal, or investment advice. Although
the information has been gathered from sources believed to be
reliable, please note that individual situations can vary therefore,
the information should be relied upon when coordinated with
individual professional advice. Past performance is no guarantee of
future results. Diversification does not ensure against loss.
Source: Financial Visions, Inc.
Understanding Term Life Insurance
In days gone by, life insurance used to be simple. You figured out
how much death benefit you needed, and then you chose between term
and whole life.
The life insurance
industry has gotten a whole lot more complicated in recent years.
Besides term and whole life (now often called "permanent life"),
there are universal policies ... variable universal policies ...
variable life ... even a new type of term life called "return of
premium." How can you weigh your options and decide which type is
right for you?
This article introduces you to the
concept of term life insurance.
Term Insurance: An Overview
Term life insurance is often referred to as "pure insurance" because
its premise is very simple: You pay a premium to an insurance
company in exchange for their promise to pay a death benefit to your
survivors if you die while the contract is still in force.
Term life insurance provides protection for a specified period 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 less expensive than permanent alternatives.
Annual Renewable Term
-- Annually renewable term, or "ART" (sometimes called yearly
renewable term, or "YRT"), is an example of a term insurance
policy that has a constant face value and premiums that are
adjusted upwards each year to reflect the increasing probability
of your death in any given year.
Decreasing Term -- Decreasing term insurance
refers to a type of annual renewable term life insurance policy
with a decreasing death benefit (face amount) and level
premiums. Decreasing term is ideal for insuring a liability that
is gradually being paid off, like a home mortgage.
Level Term -- If you prefer, you may select a
"level term" policy which guarantees that you will pay the same
annual premium for a set number of years (usually 5, 10, 15, or
20) for the same amount of death benefit. 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 an extended period of time, a level
term policy will prove less costly than an annual renewable term
policy.
Return of Premium - A relatively new type of
policy, "return of premium" life insurance provides the benefits
of traditional term life while the policy is in force, and then
at the end of the policy period, pays back all the premiums you
have paid. The catch, of course, is that you must still be alive
to collect your premiums.
Material discussed is meant
for general illustration and/or informational purposes only and it
is not to be construed as tax, legal, or investment advice. Although
the information has been gathered from sources believed to be
reliable, please note that individual situations can vary therefore,
the information should be relied upon when coordinated with
individual professional advice. Past performance is no guarantee of
future results. Diversification does not ensure against loss.
Source: Financial Visions, Inc.
Permanent Insurance: An
Overview
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 an
asset accumulation element. Premiums are considerably higher than
term rates in the beginning years, but may drop significantly, or
even disappear, in later years. Other differences may include an
increasing death benefit, a "cash value" associated with the policy,
and tax-advantaged borrowing privileges against your cash value.
Whole Life Insurance
-- This type of coverage covers you for as long as you live, as
long as you make premium payments. Usually, this type of policy
has a level premium for the life of the policy. Initial premiums
are generally high compared with term insurance premiums, but
eventually they become lower than the premiums you would pay if
you had kept renewing a term policy. Over time, a whole life
policy builds cash value at a rate of interest set by the
issuing insurance company.
Universal Life
Insurance -- With universal life coverage,
which also covers you for as long as you live, you can vary your
premium payments and the face amount of your coverage. Most of
your premium payment goes into an account, which earns interest.
You may borrow against the cash value, but eventually, if the
balance continues to drop, your coverage will end. To prevent
that, you would have to start making premium payments again,
increase your premium payments, or lower your death benefits.
Generally, your policy will state that it will pay the premiums
from the cash value of your policy. Variable universal life also
falls into this category; the difference is that a portion of
your premium in "invested" in subaccounts that resemble mutual
funds and can own stocks, bonds, cash, or some combination
thereof.
Variable Life
Insurance - This type of policy gives you an
element of control over the cash value portion of your policy.
Variable life allows you to allocate your cash value among a
variety of investment subaccounts. Although the premiums you pay
are fixed throughout the life of the contract, the performance
of your chosen subaccounts determines the growth of your cash
value and also can determine the value of your death benefit. No
matter how your subaccounts perform, the death benefit of your
variable life policy is guaranteed. Although contracts may vary,
your premiums generally won't change. And as long as you pay
your fixed premiums, your death benefit cannot go away. This is
not the case with universal or variable universal life
insurance. Please note guarantee is subject to the claims paying
ability of the insurer.
Of course, your life insurance needs
will be determined by your individual situation. And keep in mind,
the cost and availability of the type of life insurance that's right
for you depends on factors such as your age, health, and the type
and amount of insurance you need. If you are considering purchasing
life insurance, we recommending consulting us to explore all your
options and determine the solution that best fits your unique needs.
Material discussed is
meant for general illustration and/or informational purposes only
and it is not to be construed as tax, legal, or investment advice.
Although the information has been gathered from sources believed to
be reliable, please note that individual situations can vary
therefore, the information should be relied upon when coordinated
with individual professional advice. Past performance is no
guarantee of future results. Diversification does not ensure against
loss. Source: Financial Visions, Inc. |
