Life Insurance /
Term
Life
Why should I buy life
insurance? Many financial experts consider life
insurance to be the cornerstone of sound financial planning.
It can be an important tool in the following
situations:
Replace income for
dependents
If people depend on your income, life
insurance can replace that income for them if you die. The
most commonly recognized case of this is parents with young
children. However, it can also apply to couples in which the
survivor would be financially stricken by the income lost
through the death of a partner, and to dependent adults,
such as parents, siblings or adult children who continue to
rely on you financially. Insurance to replace your income
can be especially useful if the government- or
employer-sponsored benefits of your surviving spouse or
domestic partner will be reduced after your
death.
Pay final expenses
Life
insurance can pay your funeral and burial costs, probate and
other estate administration costs, debts and medical
expenses not covered by health
insurance.
Create an inheritance for your
heirs
Even if you have no other assets to pass
to your heirs, you can create an inheritance by buying a
life insurance policy and naming them as
beneficiaries.
Pay federal “death” taxes and state
“death” taxes
Life insurance benefits can pay
estate taxes so that your heirs will not have to liquidate
other assets or take a smaller inheritance. Changes in the
federal “death” tax rules between now and January 1, 2011
will likely lessen the impact of this tax on some people,
but some states are offsetting those federal decreases with
increases in their state-level “death”
taxes.
Make significant charitable
contributions
By making a charity the
beneficiary of your life insurance, you can make a much
larger contribution than if you donated the cash equivalent
of the policy’s
premiums.
Create a source of
savings
Some types of life insurance creates a
cash value that, if not paid out as a death benefit, can be
borrowed or withdrawn on the owner’s request.
Since
most people make paying their life insurance policy premiums
a high priority, buying a cash-value type policy can create
a kind of “forced” savings plan.
Furthermore, the
interest credited is tax deferred (and tax exempt if the
money is paid as a death
claim).
Life Insurance or as we call it Life
Assurance can make all the difference in the
world.
Term
Term life insurance
is the simplest and most inexpensive form of life insurance.
And it can provide the peace of mind that comes
from
protecting your family at a very low cost.
Term life insurance provides the largest
immediate death benefit for the minimum premium dollar. When
compared to traditional whole life policies, term life
insurance is substantially cheaper. Its reasonable rates
allow for the purchase of much larger coverage than can
be afforded from permanent life insurance. Term insurance
covers you for a specified period of time, usually 5, 10,
20, or 30 year periods. As the name implies, term insurance
is temporary, for a set period of time. Unlike universal or
whole life insurance it does not accumulate cash
value.
When planning for your families financial
future it's important to keep in mind that term life expires
and it is possible to outlive your policy. If you're looking
for permanent insurance that builds cash value whole life
insurance may be the answer for you. Term life insurance on
the other hand is often referred to as pure insurance
protection because it builds no cash value. Its primary
purpose is to provide for the financial responsibilities of
the insured in an affordable
manner.
Determining How Much You
Need
There are
several methods used to calculate an individual's need for
life insurance. They include but are not limited to, rule of
thumb, human life approach, and needs based
approach.
Rule of Thumb
The most
agreed upon rule of thumb is that an individual should be
insured for about 10 times his or her
annual salary. If the insured makes $50,000 a year, a policy
in the amount of $500,000 would be appropriate. This is
the simplest of all the methods for obvious
reasons.
Human Life Approach
This
method determines what your economic contribution to your
family would be over your expected
lifetime.
Needs Approach
The most
comprehensive method. All upcoming expenditures are reviewed
to determine the amount of insurance needed. Total
assets are subtracted from the total financial obligations
to determine the amount of life insurance needed. These
obligations commonly include mortgage payments, future
educational expenses, future income for family, funeral
expenses, and
more.
Types of Term Life
Insurance
After settling on a suitable policy
amount it's important to find the type of policy that is
best for
you.
Term or Straight
Term
The amount of death benefit you purchase remains uniform
for as long as the policy is in force. The premiums
also stay the same for the life of the term chosen. Level
term is by far the most popular types of term
insurance.
Decreasing Term
The
amount of death protection you purchase decreases over time,
but your premiums stay level throughout the term of the
policy. Decreasing term is typically purchased by those who
expect their insurance needs to diminish over time.
Some examples would be to cover a mortgage or a business
loan. Both of which would have decreasing obligations over
time. Families with
younger children often utilize
decreasing term insurance; as the children age the need for
insurance diminishes up until they leave the
nest.
Annually Renewable
Term
The amount of death protection you purchase
will stay the same, but your premiums increase every year.
These policies are typically purchased by
younger
individuals looking for an inexpensive policy when they're
young, but as they age the premiums become more
costly.
Convertibility
Privileges
Many term life insurance policies
offer a convertibility privilege. This is a nice feature
that allows you to convert your term policy to permanent
life insurance for an equal, or lesser amount of coverage.
The big benefit to this is that you can do so without any
evidence of insurability. With no required medical exam you
could complete the conversion, even if diagnosed with a
terminal illness. Insurance companies often hedge against
this by establishing a maximum
age.
Buy Sell
Agreement
Term
insurance is often purchased by business associates to cover
anything from a deceased partner's share of a company to
outstanding debts. This is often referred to as a "buy sell
agreement". This binding contract is negotiated
between
key business partners and covers future ownership
issues. It is also utilized for key
employee insurance.
This is designed to protect the company against the hardship
that may result from the possible loss of a valuable
contributor. Key employee insurance is very common in small
businesses where there are a small number of employees and
the loss of a "key" employee could prove detrimental to the
business.
Return of Premium Life Insurance
(ROP)
Would you
like term insurance that refunds your money
if you don't die? Well now you can—it's called Return
of Premium Life Insurance. One of the biggest objections to
buying term life insurance is that people see themselves
outliving the specified term and often think of the premiums
as wasted money. The insurance
industry has answered
that objection with the recent introduction of Return of
Premium term life
insurance.
Return of Premium or ROP combines the
benefits of traditional term life insurance with a return of
premium feature. Simply put your family receives a
lump sum death benefit if you die, otherwise if you win your
bet with the insurance company and you live the insurer
returns all your premiums. This money-back guarantee can be
particularly comforting for those that believe death will
not occur during the term of
coverage.
Conclusion
Without a
doubt straight term offers the best bang for the buck of all
the life insurance types. Combine that with the fact we're
living longer healthier lives and you've got a pretty
attractive arrangement. The number of deaths in individuals
age 25 to 44 has decreased significantly over the past ten
years, resulting in individual life insurance premium price
drops of 5 percent on average since 2000, according to the
Insurance
Information Institute. Making term life
insurance more affordable than
ever.
Term life insurance may be one of the best
deals in town.
United Financial
Group
(334) 472-0040 - Main
(904)
216-9750 - Fax
Customerservice@unitedfinancialgroup.info
