Life Insurance

Why is it important to buy life insurance?

Life insurance isn’t for the people who die. It’s for the people who live.

If you have people who depend on you for income—a spouse, young children or teenagers, a disabled adult or elderly parents, life insurance is part of a sound financial plan.

Your life insurance plan can provide immediate cash to pay off debts, funeral expenses or death taxes. More importantly, it can cover major daily living expenses by replacing lost income. It can help pay for your children’s education costs.

Do I really need to supplement my work-sponsored insurance?

A work-sponsored policy is typically not enough for most families. Many experts believe that life insurance amounts should equal at least 10 times your annual income, depending on your circumstances. Work-sponsored insurance usually covers only one to three times your yearly income, if that. And if you should leave your job for any reason, you are no longer covered.

How do beneficiaries collect after someone dies?

Just keep your insurance policy in a safe place where your loved ones will easily find it. It contains claim information and a phone number for personal guidance. They will need to get a death certificate. This is usually provided by the hospital or the people handling funeral arrangements. The claims form and death certificate are mailed to the insurance company. The insurance company will usually write or call within 10 days to make payment arrangements. Your policy also lists a phone number for a claims representative, who is trained to help with knowledge and courtesy at this sensitive time.

How easy is it to apply and purchase a life insurance policy?

It very easy to apply for life insurance. Here’s what you’ll need.

Most of it, you already know, like your name, address, place of work, that sort of thing. You’ll also need to provide basic medical information, including your doctor’s name and a little about your most recent doctor’ visit or hospital treatment.

You will also name your beneficiary who will receive the proceeds of your policy. And just to be totally prepared, have his or her social security number on hand.

If your coverage requires a medical examination, it will be quick and simple, and at a place and time of your convenience. A medical professional will measure your weight, height and blood pressure, and obtain a small blood and urine sample. That’s why you may be asked to fast for 6-8 hours prior to the exam.

Some policies don’t require a medical exam and can be purchased today for instant coverage, so ask your representative if this is your preference.

If I do need a medical exam, what should I expect?

You will need to provide a blood and urine sample and your blood pressure will be checked. Your height and weight will be measured as well. The entire process normally takes between 15 and 20 minutes. Keep in mind that this information is being gathered because the insurance company is covering a risk and wants to ensure that you get the best rate possible.

What types of insurance products are there?

There are two basic options, term or permanent life, with many variations. But for most people, it’s an easy decision – Term insurance is typically the most sensible and affordable way to go for most of your life insurance. This is because Term insurance provides coverage for a specific period of time (or term) –usually 10, 20 or 30 years. At the end of that term, the policy realistically ends. Some policies can be renewed but at incredibly high rates. Buy term insurance for the big needs (resource to get your kids grown, big debts, college, etc). With term insurance, your payment stays the same for the entire term of the policy, plus you can decrease the coverage – and the cost of the insurance – as you get older.

Permanent life products, on the other hand, provide life insurance for your entire life. It is more expensive than term insurance because you’re paying for insurance that has to last for a life time. The concept is that you fund the policy with more than the term cost and build cash value. As the cash value grows you are offsetting insurance with cash value therefore having to pay for less pure insurance which is rising in cost as you get older.

There are two main types of permanent life insurance: Universal Life (UL) and Whole Life (WL). WL is the Cadillac product while UL is the Chevrolet. Both will provide coverage for the entire life if structured properly. UL costs considerably less than the cost of WL but lacks the guarantees of WL.

The best financial plan will have a mixture of both term and permanent life and will probably have both UL and WL. You will plan to drop your term insurance as you get older and your needs reduce. The permanent life you keep to pay your final expenses. I have never met a survivor who wasn’t very glad they had some final expense resources in the form of a check from the insurance plan.

How much life insurance do I need?

The question really is how much money you must replace to ensure your family maintains its standard of living.

To figure that out specifically, start by calculating a rough estimate of your annual family budget. Include such fixed expenses as mortgage or rent, auto payments, child care, insurance needs, utilities, medical and dental bills, and other basics. Then add in future expenses such as private school and college and braces or music lessons for the kids.

If you are married, will your spouse earn any income?

Once you have a needed income number, consider investing your lump sum amount from the insurance at a reasonable risk free interest rate (4%?) so that it returns the needed income amount. Eg… $30,000 a year needed; $30,000/0.04= $750,000. It takes a large amount to keep from reducing principal each year and thusly the income as well. You could also amortize the lump sum so that after say 10 years all the money would be used up. A simple calculation with an investment calculator can provide you the number.

As a general rule of thumb family heads should be insured at about 10 times their annual take home earnings.

Why should I buy life insurance through a separate company if I already have life insurance through my employer?

If you lose your job, you will most likely lose your insurance. Most certainly, even if you’re still covered by your employer’s insurance, you’ll lose your favorable rate, which was negotiated for you as part of a group policy.

In any event, your coverage from your employer may simply not be enough. Typically, work-sponsored life insurance is no more than one to three times your annual income. If you add up your mortgage, childcare and other important expenses, you’ll quickly discover that your work-sponsored coverage won’t get those you leave behind very far. It’s virtually always good to supplement your meager work-sponsored policy!

I’m not in the best of health. Can I get life insurance at an affordable rate?

Absolutely! We specialize in finding insurance for almost anyone. For example, if you have high blood pressure, we can negotiate preferred rates for you depending on recent readings. And we’ve had great success working with those who have been diagnosed with Type I and Type II diabetes.

The bottom line is this: if you are under a doctor’s care for health-related issues, and if your condition is under control, you are very likely insurable. Talk to your personal insurance advisor to see how we can help!

I’m going through a divorce. What life insurance issues should I be concerned with?

Be sure to read your policy carefully. Ask yourself these questions: “Are you covered with a spousal rider? Who owns the policy? Who is the person responsible for paying? Will your policy lapse? What — if anything — does your divorce decree specify?” Then talk it over with your personal insurance advisor to see how we can help you during and after your divorce.

What health considerations are important in getting favorable life insurance coverage?

The better your health, the more insurance options you are likely to have. The best time to buy life insurance is when you’re healthy. For the most part, if your health issue is under control, you will be insurable.

Certain conditions – like some particularly onerous cancers – may create problems for you. But before you determine that for yourself, speak to your personal insurance advisor. You may be pleasantly surprised!

What happens at the end of my term policy?

Your term policy is most likely renewable to age 95. And you can usually convert it to a whole or universal policy – which covers you for life – before age 70. Your needs are constantly changing, so make sure you speak with your personal insurance advisor to make sure you are covered and your family is protected.

Top 12 Insurance Myths

Employee insurance coverage is enough.

Wrong! Most people need far more insurance than employee plans provide, and usually, you can’t take the insurance when you leave the company.

You should buy the most insurance you can afford.

Not true! Any reputable insurance company will recommend an amount of coverage based on your specific financial needs, like your mortgage, tuition and daily living expenses. What you can afford has nothing to do with what you need!

Everyone needs life insurance.

If you have no debts, no dependents, no mortgage, and plenty of cash for final expenses you may not need life insurance. Plain and simple! Give us a call and give us some background on your situation, and we can help confirm whether life insurance is really necessary.

I don’t need insurance if my spouse stays at home.

Well, who is going to cover the cost of what your spouse does at home, like childcare, food preparation, school transportation, home management, and so much else. This could add up to tens of thousands of dollars annually!

Whole life insurance is better because I get my money back.

Nope, not always. Whole Life has a fair return (Like tax free CD’s) and is guaranteed to be there when you die even after a full life. However, it does not compare to your investment portfolio. Remember, it is life insurance, not an investment. Term life is normally better for terms of time

The longer I wait to buy insurance, the more I save.

Actually, the best time to buy life insurance is when you are young and healthy. Later, it can be much more expensive and harder to obtain. It makes far more sense to get life insurance when you are eligible to receive the most favorable rates.

It’s cheaper to buy risk-specific policies, like cancer or flight insurance, instead of term life insurance.

Not really. You may never get cancer or be involved in an airline crash but you may eventually get heart disease, for example. A policy that covers everything will end up costing less in the long run.

Once the kids are off to college, I don’t need life insurance any more.

Life insurance is for many reasons, not just the cost of college. And remember, you may have the opportunity to reduce the current coverage on a policy – reducing your costs, but still insuring that your spouse or dependent parent won’t have to struggle with daily costs if something happens to you.

Once I buy insurance, I don’t have to think about it again.

No. Any major life change, a death or divorce, a new job—should trigger a policy review. Also, rates are competitive between companies and do change from time to time. You should speak to your insurance advisor on a regular basis (every few years).

If I die during the first two years, the insurance company won’t pay.

This is not true! The two-year waiting period only applies to specific situations, like suicide or misrepresentation when you purchase the policy.

If I have diabetes, insurance is out of the question.

Well, you might be pleasantly surprised. We work with insurance companies and other health advocates that specialize in helping people who have Type I and Type II diabetes. We will normally be able to find you a plan that fits your needs.

Term life isn’t a good choice because I just lose my coverage when the term is up.

And the answer is no! You have many options at that time. You may be able to renew your policy or convert it to another type of life insurance, often without a physical. You may also replace the policy depending on your life situation at the time of the renewal. There is also something called a Return of Premium policy which would pay you back at the end of the term while you’re still living! This is also why a good financial plan will have both term and permanent life insurance in it. Give us a call and we can provide you with options.

What is the difference between term and whole life insurance?

For most people, term insurance is the most sensible and affordable way to go. It provides coverage for a specific period of time (or term) – usually 10 or 20 years. At the end of that term, the policy may be renewable. With Term insurance your payment stays the same for the term of the policy, and you can decrease the coverage as you get older if desired.

Whole life insurance, on the other hand, provides life insurance for your entire life. Cash values can grow over time and can be borrowed. As a result, you’re paying not only for insurance, but for the savings/cash value portion — a kind of “forced savings” for later years – which makes it more expensive than term.

Should I buy life insurance for my husband/wife or children?

In most cases, it makes a lot of sense. Even though the breadwinner is the most likely candidate for life insurance, a stay-at-home parent’s contribution to the family’s standard of living is also important. In fact, when you add up the costs for daycare, meal preparation, bill paying, running errands and more, it’s estimated that the stay-at-home parent contributes significantly to the family’s standard of living. Consider: if something happens to the caregiver, could you really comfortably afford daycare and other child raising expenses? Conversely, if both adults are working and adding to the net take home, how are you going to replace one income in the event of a death? Will you lose your home?

Children can also benefit from life insurance. Insurance rates will almost certainly go up, and by purchasing a universal life or whole life policy for your child today, you can help assure that he or she can carry it into adulthood at current lower rates. Policies can be purchased with guaranteed purchase option riders to add protection after they are adults even if they have since developed bad health, weight problems, etc. Your son or daughter may also convert term life coverage into a universal policy down the road…and that’s especially valuable if a health condition arises.

Permanent life insurance is better because I get my money back.

Nope, probably not. There are typically other investment opportunities that would produce a higher return than Permanent Life (Whole Life or UL) if cash value/savings is your goal. Unless you have money to spare, permanent life is rarely the right choice for all your insurance. However, if you die at the average age of most folks, say 85-88, and need a readily available cash source like life insurance provides, the only way to insure it is through a permanent life product (WL or UL).

Term life isn’t a good choice because I just lose my coverage when the term is up.

And the answer is no! You have many options at that time. You may be able to review your policy or convert it to another type of life insurance, often without a physical, depending on your life situation at the time of the renewal. There is also something called a Return of Premium policy which would pay you back at the end of the term while you’re still living! All life insurance has its place in a good financial plan. Talk with your representative, and they can provide you with options.