Do you have significant assets that could sustain you or your family in case of financial loss?
If not, you should consider the financial security offered by life insurance.
Do you have people or things you want to protect?
For example, homeowner's insurance protects your home; auto insurance protects your car; life insurance protects your family in the event that you are no longer there to provide for them. You might also need to protect yourself against economic loss should you become sick or disabled and unable to work disability insurance can do that.
Life insurance relieves you and your family of a serious financial risk: it replaces income that would be lost in the event of your death and lets your family maintain the lifestyle you've worked hard to provide them. It's the easiest and most affordable way to safeguard the well being of your loved ones.
Once you decide what it is you want to protect, you are one step closer to determining
..well, the next step
Lets first start with the basics. Everything youve ever heard about life insurance is either wrong or at least incomplete. Lets see if we cant fix that.
There are so many kinds of insurance and so many places to look what do I do?
Why dont we figure out how much life insurance you need and then well go from there.
A Simple Formula......
Figuring out how much Life Insurance you need doesn't have to be difficult. Be wary of complicated formulas.
The goal is to make sure that your family is provided for in the same manner they were accustomed to while you were alive. We do that by replacing your income.
Here is the simple formula we give our clients;
Lets assume you make $50,000 a year and purchase a $625,000 insurance policy. When you pass away, that money could be invested at an 8% interest rate. If so, it will produce an income of $50,000 a year in interest without touching the principal.
If you feel that you can't get an 8% return, then adjust the formula. Or better yet, contact us and we will discuss the various programs we have. There is no federal taxation on money received from an insurance policy; however, there is tax on the growth. Simple, isn't it?
Or simpler yet
.12.5 times your income.
We also have a needs calculator on our term quote
engine that uses a slightly different, although still simple, method.
I know how much I need, but what kind do I buy?
Start with Term Insurance
This is pure insurance protection. It doesn't have any cash equity. It's designed to last for a certain period of time. The most popular plans are level premium where the premium stays level (the same) for 5, 10, 15, 20, 25 or even 30 yrs. A 30 yr policy would be the most expensive. The level premium policies are very cost effective for their initial guarantee period but then become prohibitive in cost thereafter.
When looking at these plans, buy a policy that makes sense. If your agent sold you a 10-year term policy and you have children that are 2 and 4 years old, fire the agent. What good is it if you have NO coverage when your children are 12 and 14 years old? If youre buying it for a mortgage, buy for the length of the mortgage. If youre buying to cover your family, buy until your youngest child (maybe unborn at this point) would be done college or self-supporting.
The level premium plans have seen a major price war in the last 18 months. You should consider shopping for a new policy even if it was purchased it the last 3 years. After all it doesnt cost anything to look.
Once you get a price for term coverage from our term quote
engine determine how that premium would fit in your budget. The goal
here is to get the amount of insurance you need first. If the premium
is comfortable then you have your answer.
What if I want to have coverage for more than 30 years?
Then, dont consider term insurance. Or at least dont consider it for the whole amount of coverage you are seeking. If you need $500,000 of coverage, consider making $250-$400,000 term coverage and the rest a universal life or whole life policy.
I heard there are policies that will build cash value for retirement or other purposes.
Well, thats also when you would consider a universal life or whole life policy
Universal Life and Whole Life
This is coverage that's designed to last for a longer period of time than a term insurance policy. It can be the policy that you'll keep for the rest of your life. Since it has a cash or equity account where the funds grow tax deferred, these policies can also be used as a retirement supplement.
If you're not sure how long you'll need life insurance then you can get a guarantee that you'll always have coverage. Another advantage is that if you decide you dont need the coverage 15-25 years later you could possibly get all of your premiums back.
Whole life generally gives you a guaranteed premium and guaranteed cash values in the policy. Universal life generally doesnt guarantee the premium or the cash values and therefore can be sold at very inexpensive premiums. Be careful here. Agents can sell a policy at a cheaper rate just to get your business, but you may find that your policy will lapse unexpectedly down the road. We sell only universal life policies that give you a guaranteed premium. We like the policies thatll guarantee your premium until youre 90 or 100 years old. If the interest rate environment were to be very low for a long period of time the cash value could go to zero, but with the guarantees your policy could remain in effect.