Why Do I Need Life Insurance?
The purpose of life insurance is to provide financially for the people who rely on you in life, and who would be financially devastated if your income or services would be removed because of your death.
Life insurance is the best and cheapest way to create an estate to protect your family against the loss of income that occurs when you die. It can also be a means of providing resources to pay inheritance taxes that may become due on your estate, typically nine months after your will is probated.
But your death may also be financially devastating to your employer or to your own business if you're self employed. Businesses and business owners will commonly take out life insurance for:
- Funding a buy-sell agreement
- Key-man insurance
- Deferred compensation
How Much Insurance Do I Need?
In today's economy the rule of thumb for a proper amount oflife insurance that will provide for your survivors is ten to fifteen times your annual income. To pinpoint the exact amount for you we will analyze your situation with a system called "Capital Needs Analysis."
This a method that takes into account what your specific needs and goals are, as well as assets such as 401k, IRAs, and so forth, that may offset what life insurance you need to buy. For example:
- The standard of living cost, with or without inflation
- How many years you want to provide for your survivors
- Disability of a loved one
- The value of your current income-producing assets
- Cost of college
- How much income your survivors will receive from Social Security
- How much you've accumulated in tax-qualified retirement plans
- Any other assets you may have
What Type Of Policies Are Available?
Your insurance needs will change throughout your life.
When you're young and single, you might need little or none; when you marry and buy a house you'll need at least enough to pay off the mortgage in the event of your death; if you have kids your life insurance needs will explode; when the kids grow up and leave, your insurance needs will drop again, and when you retire and your house is paid off your need for insurance will be comparatively low.
* Term Life insurance is intended to provide protection for a finite period of time; I 0, 20, and 30 years are examples. It's also the cheapest type of insurance and, for the average family, it's usually the best choice for providing sufficient coverage at a price that's affordable. Term insurance is pure insurance, in that it does not accumulate cash value. *
* Permanent Life insurance (whole life, universal life) is appropriate ifthere's a need for insurance throughout your entire life. Permanent policies usually build up cash over time, which can be advantageous, but they are more expensive than a comparable amount of term lite would be. They can have important uses in estate and tax planning, as well as uses for business planning.
What Factors Affect The Cost Of Life Insurance?
These are several key factors that will influence how much you'll pay for your life insurance:
- Your age
- Smoking status
- Some health conditions
- Family history
- Height, weight, blood pressure and cholesterol levels
Do note that we specialize in difficult-to-place cases and can usually obtain insurance for you even with significant health issues.
There are also various riders that you can purchase which will also increase the cost.
- Disability rider will pay the premium after 6 months of continuous disability
- Other Insured rider covers an additional person (spouse, children)
- Accidental Death rider doubles the benefit if you die from an accident
- Return of premium is available with term insurance. At the end of the term period it will refund all the premiums you paid