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Permanent insurance can provide money for things you will always need to insure
(final expenses, retirement). Term insurance can cover the cost of temporary
needs, such as mortgages and education. Now that we have discussed why you
might need permanent or term insurance, let's discuss the features of each type
of insurance.
1.
How much life insurance do I need?
If you provide financial support for dependents, you need life insurance. To
determine how much you need, deduct the total income that would be lost upon
your death from the amount required for your family's ongoing financial
stability.
2.
What is the difference between term insurance and whole life insurance?
Whole life lnsurance is usually designed to be in force as long as you live.
Term insurance typically has lower initial premiums than whole life does. The
coverage generally renews for an increased premium based on the attained age at
renewal. Benefits are paid only if death occurs during the coverage period.
Convertible term policies can be exchanged for permanent insurance without
requiring evidence of good health. If the policy is converted to a whole life
policy, premiums will be based on your age at the time of conversion.
3.
What type of insurance do I need?
This a brief overview of the various types of insurance.
Here are some things you may want to consider when purchasing term insurance:
To Help You Choose a Type of Insurance
If it is included in a policy, this provision allows policyholders to receive
all or part of the policy's proceeds prior to death under certain
circumstances, including the need for long-term care or confinement in a
nursing home. You should consult with a personal tax advisor if you consider
electing an accelerated benefit. Benefits specified in your policy will be
reduced by an accelerated benefit payment. Receipt of accelerated benefit
payments may be taxable or may affect your eligibility for benefits under state
or federal law.
5.
Are medical tests used to eliminate any applicant likely to develop a serious
health condition?
Because some health conditions are easily managed through proper medication,
therapy or lifestyle changes, medical information sometimes makes it possible
for insurers to cover applicants who might not otherwise be insurable. More
serious or incurable conditions present an enormous risk that an insurer simply
cannot assume.
6.
What should I consider when naming life insurance beneficiaries?
Because some health conditions are easily managed through proper medication,
therapy or lifestyle changes, medical information sometimes makes it possible
for insurers to cover applicants who might not otherwise be insurable. More
serious or incurable conditions present an enormous risk that an insurer simply
cannot assume.
7.
Does it make sense to replace a policy?
It may not be to your advantage. Be sure to consider the following:
Yes. You may also want to consider
To maintain their current lifestyle, your family will probably still need the
majority of your income in retirement. How much can you expect from your
company pension? Remember, Social Security won't start until age 62 and then it
will be at a lower rate than it would for normal retirement at 65.
10.
I have experienced a major life change. Should I update my insurance?
Update your beneficiary information in all your insurance policies, both work
and individual. Be sure your new spouse is named, or he or she will not be
considered, regardless of what is stated in your will.
If your spouse is primary beneficiary of your policy, you may want to designate
your children as secondary beneficiaries.You may also want to have wills that
name guardians for your children and a trustee to manage the life insurance
money for them.
It is also important to have life insurance covering your children, should the
worst ever occur.
Take the time to think about whether your financial responsibilities will
change. Will you still have dependent children? If so, will your savings and/or
investments provide a comfortable standard of living for your spouse and
dependents after your death? If not, you will need to maintain or maybe even
increase your current insurance.
If your children are grown and you have paid off your mortgage, you may want to
consider reducing the amount of insurance you carry.
What About the Life Insurance Policy
If you are thinking about replacing a life insurance policy, here are some
things to consider:
You Have Now?
When you bought the policy you currently have, you might have seen an
illustration of the projected benefits. Ask your agent to see a current
illustration to check its performance.
A Few Things to Consider
Insurance can provide the peace of mind that your family will have enough money
to maintain their current lifestyle and also be able to cover the cost of
funerals, debt repayment, mortgages and education. Your American Fidelity
representative can help you determine if their needs would be met in the event
of your death.
Term life insurance provides death benefit coverage for a specified number of
years. Term insurance does not typically provide cash value, but it offers a
lower initial premium than Whole Life insurance.
There are three types of life insurance that generate cash value: whole life,
universal life, and variable life. In these types of insurance, the premiums
charged are higher initially than they would be for term insurance. The part of
the premium that is not used for the cost of insurance and expenses is invested
by the company and builds up a cash value that may be used in a variety of
ways:
4.
How do accelerated death benefits work?
You may be thinking of buying a policy where cash values, death benefits,
dividends or premiums may vary based on events or situations the company does
not guarantee (such as interest rates). If so, you may get an illustration from
the agent or company that helps explain the policy values. The illustration
will also show you what the company guarantees.
After you have decided what kind of life insurance is best for you, compare
similar policies from different companies to find which one will best meet your
needs. Be sure to consider the following:
8.
As a single person, do I need insurance?
9.
I have the option of retiring early. How can I make sure I'll make the right
decision?
Most newly married couples forget about one of the most important plans they
will make for their future. Consider updating your coverage amounts to assure
your spouse's financial security.
Life insurance can provide a means to pay off a mortgage, should you or your
spouse die. It can also provide a means to continue the property taxes,
utilities, maintenance, and insurance that you are obligated to carry on the
home.
If a divorce has made you the main breadwinner for one or more dependents, you
may need a bigger life insurance policy. You may also want coverage on your
former spouse or have him or her legally obliged to carry insurance if you rely
on the person for child support. You may also want to change the beneficiary on
your life policy if your spouse was named.
Children are our pride and joy. They are also our greatest responsibility.
Remember to take into account education funds, supplemental income to provide
for children younger than 18, and food and clothing expenses.
In today's fast-paced environment, it would not be unusual to think about
changing your career. If you are covered by group life insurance, it may not
remain in force when you leave your job. Find out what will happen if you leave
your job: Can you convert your group policy to an individual policy? If so, how
do you complete the conversion? Will you need a physical to continue the
policy? If you have to pay for converting the coverage, would it be better to
buy new coverage?
Remember, any employee-sponsored group life insurance probably won't remain in
force when you retire. Ask yourself the same questions listed above for Career
Change. These concerns apply to you too.
Life Insurance Answers is sponsored by
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