If you’re like most people, you don’t like to think about your mortality. And for that reason, you may have avoided purchasing life insurance – or the appropriate amount of coverage. While this is a common occurrence, it could result in financial hardship for your family if you were to die prematurely. In fact, research shows this is a difficult issue for many Americans. Forty-four percent of all U.S. households (48 million) either don’t own any life insurance or believe they should own more. Among those who do already own some life insurance, 40 percent believe they don’t have enough to meet their needs!
WHY SHOULD YOU CONSIDER PURCHASING LIFE INSURANCE?
Life insurance offers basic and essential financial protection – and it can help to relieve many uncertainties about the future financial well-being of those who depend on you
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SIX IMPORTANT QUESTIONS FOR THOSE BUYING LIFE INSURANCE
DO I NEED LIFE INSURANCE? In general, if any individuals are financially dependent on you or if you need a way to provide funds for your final expenses, the answer is yes. Of course, the primary role of life insurance is to help provide security against the loss of your income, for those who depend on you.
How? If you die, life insurance can help your beneficiary pay for your final expenses (such as medical and funeral expenses), your monthly mortgage payment, you child’s college education and income for your spouse. And don’t forget that certain milestones in your life – such as getting married, having a child and buying a home – will have an impact on your life insurance needs. In addition to pure death benefit protection, some life insurance policies contain a cash value component – sometimes what is referred to as a “living benefit” – that can be accessed through loans or withdrawals2. These funds can be used for a variety of purposes, including starting a small business, funding education costs, or supplementing retirement income.
Today, 1 in 3 insured adults have only group life insurance obtained at work. Adults with only group coverage carry the lowest amounts of life insurance1.
2. HOW CAN I DETERMINE HOW MUCH I NEED? Identifying your financial goals can help you tremendously. For example, if you want to protect your family’s fundamental costs of living – including mortgage or housing expenses, medical bills and college tuition – in the event of your death, the life insurance coverage you purchase must be adequate to cover your short- and long-term financial obligations.
On average, households saying they need more life insurance own enough life insurance to replace their income for 2.8 years, but thought they should have enough to cover six years of income. This large gap in life insurance coverage between what consumers actually own and what they believe they need averages $200,000 of additional life insurance needed per household.1
As you make these calculations, you should take into account such factors as the loss of your future income, inflation, the increase in your children’s educational costs – and any special events that you would like to be able to provide funds for in the event of your premature death – such as a child’s wedding or graduation.
3. WHAT KIND OF LIFE INSURANCE SHOULD I BUY? There are two basic types of life insurance; term life and permanent life. Your own specific needs and financial goals will help you determine which type of combination of types of life insurance may be a good choice to help you to protect your family.
Term life insurance provides insurance protection for a specific period of time, such as 10, 20 or 30 years. This type of term life insurance provides a death benefit only if you die during the period specified in the policy. If you survive beyond the end of the term and do not renew or replace your life insurance coverage, no death benefit will be payable.
Permanent life insurance can provide you with life insurance protection for the duration of your life, as long as the policy is in force when you die. In addition, permanent life insurance policies offer benefits in the form of the policy’s cash value (the “living benefit” we referred to earlier), which can be accessed through loans, partial surrenders or withdrawals during your lifetime.2 It’s important to understand, however, that these uses may reduce the policy’s death benefit, and could cause the life insurance policy to terminate.
There are two basic types of permanent life insurance policies:
· whole life insurance
· universal life insurance
The one that’s appropriate for you will depend upon your personal situation.
TYPES OF PERMANENT POLICIES: WHAT’S A GOOD CHOICE FOR ME?
A whole life policy has premiums that remain level over the life of the policy and must be paid regularly. Policy premiums, death benefits and cash values are guaranteed. The cash value increases at a fixed, guaranteed rate. Ordinarily, a whole life policy is a “participating” policy, meaning the policyholder is entitled to share in any annual distribution of the company’s surplus. This distribution is commonly known as a “dividend”. Dividends are not guaranteed, but when paid, can be used in various ways, such as providing additional insurance coverage or, if sufficient, paying part or all of the life insurance policy’s annual premium.
A universal life policy allows the policy owner, after the initial payment, to pay flexible premiums, subject to certain minimums and standards. Premium payments are credited to the life insurance policy’s account value that earns interest at a current rate, which changes monthly. This type of policy remains in force as long as there is sufficient account value to pay the life insurance and policy charges. Some universal life insurance policies offer guaranteed death benefits.
4. HOW CAN I PURCHASE LIFE INSURANCE? Because matching a life insurance product to an individual’s needs and goals can be complicated, you may want to consider using the services of a skilled financial professional. Twenty-nine percent of Americans would like to discuss life insurance with a financial professional, yet three-fourths of American households do not have a personal life insurance agent, or a personal financial advisor or planner.1 To find an agent, ask for referrals from co-workers, friends or family members. We can help – to contact a financial professional, visit: http://www.floridainsuranceweb.net/Home Be sure to let your agent know that you prefer to buy life insurance from a company with strong financial ratings – as that is an indicator of your insurance company’s ability to pay its claims in full.
5. WHAT HAPPENS IF I DELAY MY DECISION TO BUY LIFE INSURANCE? You should never feel pressured to purchase life insurance. The decision you make needs to be the right one for you and your family – and you should never feel rushed. However, it’s important to keep in mind that when you purchase life insurance, two of the primary factors that determine your premiums are your age and your current health. In general, life insurance premiums become higher as you get older. In addition, if you have a medical condition that worsens over time, you premiums may go up or you may be denied coverage.4 Twenty-five percent of household heads feel they do not have a plan in place to provide a decent standard of living for their family if they died tomorrow.
6. ONCE I PURCHASE LIFE INSURANCE, AM I ALL SET? You’ve certainly taken a step in the right direction! But why is it only first step? Because your personal situation and thus your need for life insurance is likely to change over the years. You may get married, have children or grandchildren, or advance in your career. Any one of these circumstances could require a review of your current coverage. Life changes. And so does your need for life insurance protection. One-third of Americans with life insurance would like to review their coverage every year or two, and almost one-half want a review within five years.1 By working with a financial professional, you can make sure that the people you care about most are properly protected, both now and in the years to come.
Life changes. And so does your need for insurance protection we can help you with quotes for life insurace.