Category Archives: Insurance

Do You Have Enough Life Insurance?

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Most of us know that we need life insurance, but it may be less clear if you have enough life insurance. According to a recent LIMRA study, 90% of us think that the primary wage earner in the family needs life insurance.[1] While you may think that the term policy you get through work is enough, if something were to happen to you, would your family be financially secure?

It may seem like a daunting task, involving complex calculations and endless spreadsheets. A qualified financial professional can give you detailed insights into how you can secure your family’s future in case the worst happens. If you’re looking to gauge how much life insurance you need, consider the following four factors.

1. How much annual income will your family need?

It’s hard to come up with a total number for life insurance, but easier to think in annual increments. How much money are you and your spouse bringing in each year? Will you need that same amount to be comfortable in the future? More? Less? If your wallet is feeling light and it’s hard to make ends meet, think of what would feel comfortable and start there. Factor in all expenses that you pay each month such as rent, utilities, groceries and insurance.

This isn’t a decision to make on your own – involve your beneficiaries and have frank conversations about what life would be like if you – or they – are no longer in the picture. Whether that’s your spouse or dependent parents, understand what they would want if you can no longer contribute financially.

  • Will beneficiaries be able to keep working at their current jobs without your support? If they are becoming the primary caregivers to your children, that may no longer be possible.
  • Are they satisfied with your annual household income? Your perceptions of how easy life is at your current budget may be different.
  • Do they want to continue living in your home? Your spouse may want to move closer to family or downsize if they are alone in your home.

Determine a hard number to start with, based on your current income and your beneficiaries’ wishes.

2. For how many years will they need that income?

Consider how long your family will need to maintain their current cost of living.

  • How much longer will your children be in school or living at home?
  • If you’re married, does your spouse have a separate income and retirement savings?
  • Does your spouse have any other revenue that kicks in at a later date, such as a trust or inheritance? Your family may need less annual income after that time.

It’s important to know the maximum number of years you’ll need your insurance to provide for your family. Multiply this by the annual income you’ve estimated.

3. Take debt, funeral expenses, and other obligations into account.

Do you have consumer debt or a mortgage? If so, it’s a good idea to have enough insurance for your family to pay off those accounts and have income left. It’s also a good idea to make sure your children’s college educations are taken care of. Add these debts and obligations to your total.

4. Factor in your current savings.

If you have savings, other existing insurance policies, and you’re on track with your retirement accounts, you can subtract those assets from the total amount your insurance policy will cover. Make sure that you have kept track of all your accounts and listed your beneficiaries on retirement, pension and life insurance policies. Keep those records up to date if anything changes.

Remember that it is a general estimate of what you’ll want to consider when determining if you have enough life insurance coverage. The benefit of life insurance is that your beneficiaries will receive a lump sum payment after your death – no probate or waiting. If you find that the estimated face value of your policy is untenable, work with an agent to determine how much your family will need to live comfortably. By investing a portion of the death benefit, your beneficiaries can plan for some growth in their funds before they need to use them.

When determining if you have enough life insurance, consider your family’s annual income, how long they’ll need to earn income at that rate, your debt and expenses as well as any savings, inheritance or other earnings you have.

[1] 2018 Insurance Barometer Study, Life Happens and LIMRA

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Death Benefits Designed For Your Life

Life insurance is a crucial component of a healthy financial strategy. While thinking about what happens once you leave this world is never pleasant, planning and providing for your loved ones can ease your mind and help you focus on living.

What is an insurance policy?
A life insurance policy is a contract between the policyholder and the insurer – typically an insurance company. In exchange for paying a specific amount of money on an ongoing basis (a premium) the insurance company promises to pay a
d. For example, you may pay $25 per month to the insurance company and in exchange they will give your beneficiary $250,000 upon your death.

Life insurance policies are not one-size-fits-all. They’re designed with the current and future needs of your family in mind. For instance, if you’re married with a mortgage and three young children who plan to go to college, you’ll need a significantly higher death benefit than if you were retired, owned your e,homildren were grown. Consider who you would leave behind and what financial responsibilities will they inherit upon your death. The type of insurance and the amount of coverage that suits one family may not help accomplish the goals of another.

The above describes the simplest form of insurance policy, but there are a wide variety of policies that can be used for more than just a death benefit. Certain policies serve as part of an effective estate planning strategy to preserve wealth and provide significant tax advantages. Others offer a cash payment to the insured in the event of an illness or other emergency rather than just in the event of their death. Still others offer retirement benefits, replacing income long-term once you leave the workforce. Insurance policies are all safety nets that a deliver added security and peace of mind for you and your family. Their variety means that they can be tailored to exactly your needs.

Term vs. permanent life insurance -- what’s the difference?

Term life insurance, also known as “pure life” or “death benefit only,” is the most basic, common and least expensive type of insurance. It provides financial protection in the event of the insured’s premature death, but only for a specific time period, which is referred to as the policy’s term. Typical terms are 10, 15, 20, 25 and 30 years.

Throughout the term, the amount of the death benefit and the premium, or cost of the policy, generally remains fixed. If the insured dies during the policy’s term, the beneficiary is paid the full death benefit in one lump sum leaving the policy with no other additional value. If the insured stops paying the premium, the policy ceases and retains no cash value.

Permanent Life Insurance is the umbrella term for all the life insurance that provides lifelong coverage. It’s essentially the opposite of the coverage offered by term insurance. Permanent life insurance provides an insurance component, as you would expect, but it also presents a unique savings component. A portion of each premium payment is allocated to savings and any increase in value accumulates tax-deferred. The total translates to the policy’s cash value.

Another attractive feature of a permanent life insurance is the ability to borrow against the policy, if needed. Of course you’ll need to repay the loan with interest, otherwise the policy’s death benefit will be reduced. If you decide to surrender the policy, you’ll receive the total cash value in a lump sum and your coverage will cease.

Types of permanent life insurance
Whole life insurance and universal life insurance are the two main types of permanent life insurance. A whole life policy comes with level premium payments (where payments remain the same for the live of the policy), the opportunity to accumulate cash over time, and a fixed death benefit. The addition of a living benefit, like a loan feature, is also an attractive option.

A universal life policy offers the policyholder the additional flexibility of increasing or decreasing the death benefit and changing the amount and frequency of the premium payments.

There are certainly more differences between the two, so speak with a qualified insurance professional to help you determine the type, coverage, flexibility and features that best meet your family’s needs. With a life insurance policy in place, you’ll be able to enjoy today and worry less about tomorrow.