Life Insurance
Life Insurance. You know you need it. But which type of coverage makes the most sense for you and your family?
At Insurance Advisory Services, we can help. Let us explain the options to you, and recommend a policy that best meets your particular needs.
In general, there are the two main types of life insurance: temporary (or term) life insurance; and permanent (or whole / universal) life insurance.
Temporary (or Term) Life Insurance
Temporary or term life insurance is coverage that is purchased to cover only a specific term (number of years). With a term life policy, you are buying a certain dollar value of coverage (face amount of the policy) for a specified number of years (usually, 10, 15, or 20 years) for a set premium. Term life insurance policies do not accumulate a cash value. And if the insured does not die during the term of the policy, no payment is made. For these reasons, term life insurance is often called "pure" life insurance, as the premiums simply buy the beneficiary protection in the event of the insured's death during the term of the policy and nothing more.
Term life insurance is a good option if you are the primary income provider for your family and are looking for an economical way to help provide for your loved ones, in the event of your untimely death, during the height of your earning years.
Premiums for term life insurance are typically much lower than those for whole or universal life policies. Most policies are portable (you can keep your policy if you change jobs or retire, as long as you continue to pay the premiums), and will provide an income tax-free payment to your beneficiary upon your death. Purchasing a term policy is also an excellent and affordable way to supplement the coverage you may already be receiving through your employer's basic group life insurance policy.
Contact us today to request a quote. |
 How Much Life Insurance Do You Need?
The general rule of thumb is 7 to 10 times your current annual income, depending on whether you are seeking to match your present standard of living (if so, 7x is fine), or provide for your increased earning potential over time (in that case, l0x is more appropriate).
Complete the worksheet below to learn your target number. Do not enter any comma.
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Permanent (or Whole / Universal) Life Insurance
Permanent life insurance is coverage that remains in force until the policy matures (the insured dies and the policy pays out), unless the policy holder fails to pay the premiums or otherwise maintain the policy. The premiums paid under a permanent policy work to build a cash value that reduces the insurance expense over time and, thereby, the risk to the insurer. While certain restrictions apply, the owner of a permanent policy can usually access the funds that have accumulated in the cash value, through loans or withdrawals, or can even choose to cash-in the policy before it matures, although for a much reduced value (the surrender value).
Permanent (or whole / universal) life insurance is a good option if you are the primary income provider for your family and are looking for a more comprehensive plan to help provide for your loved ones after your death, and/or a way to supplement your retirement income in your later years.
Two of the most popular forms of permanent life insurance are: (1) whole life insurance; and (2) universal life insurance. Whole life insurance policies are structured to provide fixed annual premiums for the life of the policy, as well as a guaranteed cash value and death benefit, which are based on an agreed schedule of values set forth in the policy. The trade-offs that whole life policy holders must make for the security of fixed premiums and guaranteed benefits are: (a) some inflexibility regarding premiums – whole life premiums cannot typically be renegotiated or offset against the accumulated cash value in later years; and (b) a lower internal rate of return, when compared as an investment instrument, to both universal life insurance policies and some other savings vehicles.
Universal life insurance was created to address some of the perceived short-comings of whole life insurance. As such, universal life policies offer greater flexibility in the payment of premiums, and have the potential to yield a higher return, as the interest rate for the policy's cash account is not fixed, but rather tied to prevailing interest rates or the financial markets. In addition, a more flexible death benefit is available with universal coverage.
For more details, or to find out which coverage is best for you, contact us today.
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Is Term or Whole / Universal Life Insurance the Better Choice for You?
Take this short quiz to determine which type of coverage best meets your needs. Answer "Yes or "No" to each question.
If you answered "yes" to Questions 1-7, a Term Life insurance policy may best meet your needs.
If you answered "yes" to Questions 1-5 and Questions 8 & 9, a Whole or Universal Life insurance policy may best meet your needs. |
Where would you turn for help?
If you should become too sick or hurt to work, the question is: Where would the money come from?
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Resources |
Drawbacks and Limitations |
| Social Security |
69% of all initial Social
Security applications are denied" |
| Swing: and Investment
accounts |
If you save 10% of your
income per year, one year of disability without a
disability policy could use 10 years of savings and
investments. |
| Employee group disability |
Many plans cove; only
base pay and have a cap on benefits. Benefits are
often taxable. |
| Workers' Compensation |
It pays only a Limited
amount over a relative short period of time and only
cover losses due to a work related illness or
injury. |
| Loan from a bank |
Who will lend funds to
you, if you can't work? How will you pay it back if
you remain disabled? |
| Friends and relatives |
Can your spouse continue
to work while caring for you and managing the
household? |
| Spouse's income |
Can your spouse continue
to work while caring for you and managing the
household? |
*Source: United States House of Representatives Committee on Ways and Means, 1996.
An income protection plan can help provide security for your family if something should happen to you.
You work to provide a continuous income, whether you are the sole breadwinner or one who shares this responsibility. If you lost your earning power as the result of a disabling illness or injury, a disability insurance plan would provide continuity of income when you need it most. For you and your family, it could mean the difference between financial distress and finical stability.
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