Do you want to make provisions for the welfare of your family after
your death but find the subject of life insurance confusing or
intimidating? Read on, because it's probably easier to understand than you
think, and the rewards can be substantial.
Life insurance is a financial resource for your loved ones in the event
of your death. You enter into a contract with an insurance company that
promises to provide your beneficiaries a certain amount of money upon your
death. In return, you make periodic payments, known as premiums.
The size of the premiums is generally based on factors such as your age,
gender, medical history and the dollar amount of life insurance you
select. Some policies may require a medical exam before premiums are
Certain types of life insurance may also provide benefits for you and
your family while you're still living. Policies such as whole life or
universal life accumulate cash value on a tax-deferred basis, and that
value can be used to supplement your retirement income or help provide for
a child's education. Life insurance can be an important part of anyone's
financial portfolio. Financial advisors often recommend developing a
financial plan that includes an appropriate amount of life insurance as
part of a comprehensive strategy for financial security.
What kind of life insurance and how much, if any, do you need? Take a
few minutes to learn the basics so you can make an informed decision.
Did You Know......
You may not need Life Insurance at all if you are single and have no
children. However people who want to protect their family's standard
of living or who own a business should seriously consider how much
life insurance to buy.
One rule of thumb is six to eight times the wage earner's income for a
married couple with two young children.
The amount you need can be much less, depending on a number of factors,
such as how much your spouse earns and how much you have saved.
There are several types of life insurance and there are
many decisions you will have to make when assessing your life insurance
needs. The first of which is whether you need permanent insurance or term
insurance. A simple way to understand the differences between these two
types of life insurance is by comparing them to something familiar to all
of us--finding a place to live.
To take a very simple approach, think of buying permanent
life insurance as owning a home, while buying term insurance as
renting one. There are advantages and disadvantages to both. Like owning
property, owning permanent life insurance is usually an appropriate way
for people to meet long-term needs. Over time, it may be the least
expensive form of life insurance since payments may be fixed and it builds
equity. Plus, this equity (called the cash value) accumulates on a tax
In contrast, purchasing term insurance, like renting
property, is usually an appropriate way for meeting short-term or
temporary needs. Initially, premiums are often very affordable. However,
lower premiums increase over time with age, and term policies build no
cash value. Therefore, a term policy purchased to provide a lifetime of
coverage could actually cost more than a permanent policy.
Types of insurance can be likened to types of lease
agreements. Term policies have lower premiums but must be renewed at
predetermined intervals, at which time the premium may increase.
OWN vs. RENT
Higher initial premiums but...
Lower initial premiums but...
Here are the descriptions of the basic types of life
Term life insurance offers protection that insures your family for a specified period of time
- usually anywhere from one to 20 years. A term policy pays a benefit if
you die during the period covered by the policy. If you stop paying
premiums, the insurance stops. These policies do not build a cash value.
Whole Life Insurance or permanent
insurance, provides protection, as well as a cash value.
Additionally, many companies pay policyholders an annual dividend.
Dividends provide both flexibility and increased value to your life
insurance policy. They can add more coverage to your overall insurance
benefits and can build a sizable cash value. They are not, however,
guaranteed. Of course, life insurance should not be purchased solely for
accumulation. Its primary purpose is protection.
Universal Life Insurance is flexible. These policies are interest sensitive and permit the owner to
adjust the death benefit and/or premium payments, within limits, to fit
the individual's situation. Your premiums are credited to an accumulation
fund, from which costs are deducted and to which interest is then
credited. As with whole life insurance, the cash value is yours. You may
withdraw it or borrow against it at any time. Read your policy carefully
to understand how loans and withdrawals affect the death benefit.
Variable life insurance is for those who want to tie the cash value of their life insurance policy
to the performance of the financial markets. You decide among several
investment options how your net premiums are to be invested. While monies
invested in the investment options have the potential for growth, such
funds are subject to market risks including the loss of principal. In
other words, some may make or lose money depending upon the performance of
the market and the investment option you select.
For all your Individual and Group Health Insurance, Life Insurance, Health Plan for Seniors, Disability Insurance, Cancer Insurance and Dental Insurance needs, contact Karen deGeurin at KdeGeurin@jessakin.com or Jess Akin at JAkin@jessakin.com
For more information please call (281) 955-9540 or e-mail
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