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| Life Insurance FAQ |
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| Who needs life insurance? |
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Single individuals with college loans that need to be repaid. |
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Young parents with children to support. |
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Families with children who may one day want to attend college. |
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Homeowners with a mortgage to pay off. |
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Parents of children with special needs, who will require financial assistance into adulthood. |
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High-net-worth individuals and families with sufficient assets to trigger estate taxes. |
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Owners of a family business who want to pass the business on to a child or children. |
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Business owners with one or more partners who may need to be bought out. |
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Anyone who depends on their income or assets to provide for dependents. |
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Anyone who depends on their income or assets to provide them or their dependents with a comfortable lifestyle. |
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| Why do I need life insurance? |
Many people think they don’t need life insurance because they are protected in some other way. Those other sources of income are important, but will they be enough?
Savings and Investments - You are saving and investing for the future.
Congratulations. But if you feel you can only afford one or the other right now, consider buying the life insurance first. Why? |
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As long as the policy is in force, the money is guaranteed to be there when it is needed.* |
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Fiscal discipline is built into the plan - with permanent life insurance regular premium payments to a: |
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Whole life policy offers guaranteed cash accumulation. |
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Universal life policy can increase based on current interest rates |
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Variable universal life policy may increase or decrease based on market performance. |
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Management expertise is provided for you. |
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If death takes away your income, the policy proceeds can replace it for your family. |
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* Guarantees are based upon the claims paying ability of the issuer. |
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What about Social Security? |
Virtually everyone will be covered sometime, assuming the system stays solvent, but: |
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The benefits generally fall far short of what your family will need to maintain their current lifestyle. |
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A surviving spouse will not be eligible for benefits unless he or she is caring for an unmarried child under age 16, or until he or she turns 60. That’s a lot of ineligible years. |
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What about Employee Benefits? |
You may have some life or disability insurance provided by your employer, but: |
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Life insurance is usually group term, which does not build cash values. |
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Group coverage is not portable - it is lost when you change jobs or retire. |
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It probably is not enough to maintain your family’s standard of living. |
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What are the advantages of life insurance? |
No matter what kind of life insurance is right for you, there are many advantages in addition to the specific ones built into your policy:
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Your family’s essential financial needs and objectives are addressed. |
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Your death benefit is passed to your beneficiaries free from federal tax. |
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The death benefit is paid to your beneficiaries without the expense, delay or publicity of probate. |
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Your premium is based on your age and health. The earlier you buy, the less it costs. |
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Will you family have enough money to cover all their needs? |
How prepared are you for life’s uncertainties? |
If you were to die prematurely, become disabled, or perhaps even live too long, would it spell financial disaster for your family? It doesn’t have to if you’re properly protected. Life and disability insurance are just two examples of products designed to help protect you and your family from the financial hardship that can so often accompany these events.
Your income - the money you earn - provides the foundation for everything you do. From paying the mortgage to clothing your children to anything that makes you feel financially secure, everything is premised on having enough money.
Having the proper insurance coverage can help provide this money when you need it most. |
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| Think about it: |
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If you own a house, you probably have homeowners insurance. |
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When you buy a car, you automatically purchase automobile. |
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But if you don’t have enough life insurance, or you don’t think you need disability insurance, you are taking a far greater risk. |
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What kind of life insurance should I buy? |
There are many different kinds of life insurance. Which kind of policy you should buy depends upon: |
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How much protection you need.
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How long you will need it. |
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What you can afford to pay. |
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In general, there are two types of life insurance - term and permanent |
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What is term life insurance? |
Term insurance is designed for individuals with a temporary need for coverage. It pays a benefit only if you die while the policy is in force, and it offers the most initial protection for the least amount of premium. Over time, permanent insurance is more cost-effective.
There are basically two kinds of term insurance policies:
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Level Term provides a level death benefit for a specified period of years, (usually 5, 10, 15, 20 or 30 years) at a guaranteed level premium. |
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Annually Renewable Term provides a level death benefit for a specified period of years. Premiums increase every year. |
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*Additional riders can be added to most policies. |
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What is permanentlife insurance? |
Permanent life insurance provides coverage for an insured’s lifetime. It generates cash value that accumulates tax deferred, and which can be borrowed against to cover college expenses or to supplement income. |
There are many types of permanent life insurance: |
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Whole Life - provides a level death benefit, generally at a level premium and food to education, debt reduction. There are a variety of whole life policies, including those with limited |
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Universal Life - provides an adjustable death benefit. Cash values are based on the company’s current interest earnings and premiums are flexible so long as there is sufficient cash value to cover all policy charges and expenses each year. |
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Variable Universal Life - like Universal Life, the death benefit is adjustable. Cash values are based on the performance of separate investment accounts held inside the policy. Your policy’s value is linked to the investment performance of these separate accounts. Premiums are flexible provided there is sufficient cash value to cover all policy charges and expenses each year. Because earnings are tied to the market, it is possible for the policy to fluctuate up or down. |
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Survivorship Life - is coverage provided for two people, usually spouses, under one contract. The death benefit is paid to the named beneficiary at the second death. Premiums are based on the age and rating of each insured. |
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In addition, a variety of riders can be added to a policy to customize it to your unique needs and objectives. |
For a specified period of time, most term policies can be converted to permanent insurance - regardless of your insurability. |
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How are term life insurance and permanent life insurance different? |
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Term vs. Permanent |
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Term Insurance |
Permanent Insurance |
| Main Purpose(s) |
Short-term financial Liabilities |
Long-term financial liabilities and cash accumulation |
| Cost |
Lower in early ages Increases with age based on term duration |
Initially, higher than term, but Level premium can become more Cost effective as you age |
| Coverage Duration |
Limited time - generally for 5 -20 years |
Lifetime |
| Accumulates Cash Value |
No |
Builds cash value on a tax- deferred basis |
| Access to Cash Value |
Not applicable |
Yes, through loans and withdrawals* |
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| *Certain limitations may apply to loans or withdraws. Policy loans and withdraws will reduce the death benefit and cash values, and may be taxable under certain circumstances. |
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How much life insurance do I need to be protected? |
You may already have some life insurance. Is it enough? Think about the cash and income needs your family will have if you die prematurely. Which of these are of concern to you and your family? |
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Final Expenses - funeral expenses, medical bills not covered by health insurance, executor's and attorneys' fees, court costs, taxes, etc. |
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Debt Repayment - mortgages, car loans, credit card debt, college loans, home improvement loans, etc. |
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A Place to Live - would you want your survivors to remain in the family home? Monthly Essentials - food, clothing, daycare, medical care, electricity, gasoline, taxes - these are all essentials. |
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Non-essential Lifestyle Needs - cable TV, the daily newspaper, children's activities, sports equipment, vacations, gifts. |
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Education - if you have children, do you have enough to afford a college education? |
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Emergencies and Opportunities - what about unexpected illnesses or a temporary layoff of your working spouse? A new roof? A child’s braces? A son or daughter’s wedding? Or, an unexpected business opportunity? What other monthly obligations do you have? |
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