Life

IS LIFE INSURANCE A LIFE OR DEATH MATTER? You are not planning to have a heart attack tomorrow, or get a cancer diagnosis, or accidentally step out in front of a bus. For that reason, and especially if you are young and healthy and have no dependents, life insurance probably isn’t for you. Or is it? Let’s look at what life insurance is, what it covers, and why people buy it. Then you can decide if now is the time to contact an independent agent in the Trusted Choice network who specializes in life insurance. Because these agents work with multiple life insurance carriers, they can compare policies and options on your behalf and help you make the best choice. Contact an agent at Crown Co insurance for help meeting your life insurance goals. LIFE INSURANCE STATISTICS 40% of American adults have no life insurance Over 50% of U.S. households lack adequate life insurance coverage About 40% of people surveyed say they would have immediate financial trouble if the primary wage earner in their household died WHY BUY LIFE INSURANCE? As with all insurance, life insurance plans are about preparing for the unexpected. We don’t plan to have a heart attack or meet an untimely end. We may fret about the unforeseen, but there are few ways to prepare for it. Life insurance provides a way to be prepared and get peace of mind. The main reason to buy life insurance is for financial protection for your family and dependents. If you are the sole income earner or the major provider in your family, then life insurance definitely makes sense. If you should die unexpectedly, your policy will help your loved ones pay your final expenses and potentially receive ongoing support. The amount they receive will depend upon the size of policy you buy.

DO YOU NEED LIFE INSURANCE WHEN YOU ARE YOUNG? Most people don’t think about buying life insurance when they are young, healthy and single. However, if something should happen to you unexpectedly, a life insurance policy could pay for your student loans or other large outstanding debts, as well as your funeral expenses. These are never fun things to think about, but evaluating risks is a first step to preparedness. Another good reason to consider buying life insurance at a younger age is to lock in rates. The affordability of life insurance is based largely on your age and risk factors, and life insurance for adults becomes increasingly expensive. While you are young and healthy, you will pay lower premiums. With short term insurance you can choose a lock-in term, such as 15 or 20 years at a preferred rate. It is important to know that many term policies can be converted into permanent policies later on, without having to re-qualify. If you develop a severe or chronic condition at any point, your life insurance is already secured. Essentially you can insure your insurability. LIFE INSURANCE OVER 30 Most people begin seriously thinking about buying a life insurance policy at about the time they start a family. If you are like many people, the light bulb may come on at about the age of 30, when you realize that you are mortal, and that you have real financial responsibilities. An important consideration for anyone who wants to purchase life insurance is that it will never be cheaper than it is today. It’s not too late at the age of 30, 40 or 50 or even later to buy life insurance that will protect your dependents from financial hardship or provide for you in retirement. But your costs will go up the longer you wait. If you do buy life insurance now, you can lock in a life insurance premium at a more affordable rate than it will be a few years down the road. HOW MUCH LIFE INSURANCE DO YOU NEED? Choosing a life insurance plan requires a bit of math. You want to figure out how much your family needs for daily spending and major upcoming expenses in the event that you pass away too soon and cannot provide for them. Or, if you are young, single and healthy, you can look at the cost of paying off any debt you have accumulated, or the cost of care for an aging parent. For the following simple example, we will pretend there is no interest or tax. But in reality those factors will affect the amount of benefit your beneficiaries receive.

Example:

You purchase a $500,000 life insurance policy.
Upon your passing, your family spends $10,000 for your final expenses, leaving $490,000 to be divided up over the payout period for your designated beneficiaries.
If the payout period is 20 years, the payments would be about $24,500 per year, or about $2,040 per month.

Again, interest and tax are not figured into this simplified example. What makes life insurance so confusing is that there are several different types of coverage, including term life and whole life or permanent life insurance. Additionally, the details of the policy you choose will be unique to your personal situation. LIFE INSURANCE TERMINOLOGY It can be difficult to make sense of life insurance terminology. Here is a brief overview of the most common terms: Accidental death insurance: Also known as accidental death and dismemberment insurance, or AD&D, this coverage pays you or a beneficiary a benefit if you are in an accident that results in your being killed or dismembered. Annuities: An annuity is a type of insurance that either pays income after your initial investment (immediate annuity) or accumulates income (deferred annuity). Either of these types of annuities can be fixed (guaranteed) or assigned a variable rate that pays out based on the policy’s associated investments. Life insurance companies typically offer annuities to help people obtain a stable income during retirement. Critical illness insurance: While not a life insurance policy, critical illness insurance is often available through life insurance companies. You might buy critical illness insurance (or CI) if you have a family history of heart disease or cancer in order to ensure that you have the financial resources to pay for your care if you are diagnosed with a severe illness. No exam life insurance: This is life insurance coverage that some companies offer without requiring a medical exam first. Typically, this option will be more expensive because without submitting the results of a medical exam to the insurance company, you are an unknown and potentially greater risk. Term life insurance: This is a life insurance policy that provides a death benefit only. Your annual premiums are locked in for a set term, such as 10 or 20 years. In the event that you pass away during this period, a death benefit is paid to your beneficiaries. Permanent life insurance: This is a long-term policy, such as universal life insurance or whole life insurance, that includes an investment component and can cover retirement expenses in addition to providing a death benefit. Universal life insurance: A permanent life insurance policy with a “liquid” account that accrues cash value, as well as interest, with each premium you pay. You can take out loans as needed for unexpected expenses or opportunities, such as a home purchase. You also can pay more than the scheduled premium, or take breaks from paying premiums. Whole life insurance: Whole life is a permanent policy with an investment component that provides for your financial needs similarly to universal life insurance, but without the liquidity of the funds. This life insurance policy accrues a cash value and pays out at the end of the policy, if it is kept current. FINDING THE RIGHT LIFE INSURANCE FOR YOU

Life insurance causes more confusion for people than perhaps any other type of insurance, partly because there are several different types of life insurance products, and partly because the best life insurance is unique to each individual. Should you buy term life or permanent life insurance? Do you need a broker or can you get life insurance from an agency? Should you buy life insurance coverage online or is that too risky? While you can buy online life insurance, it may be difficult to know what you are getting and whether it will adequately meet your family’s needs. Buying life insurance is a very personal decision. You may want a policy that builds cash value over time, or you may simply want to purchase coverage that will provide a death benefit if you should pass away within a specific term. Depending upon the ages of your children and how long it is until they graduate from college, a 10-year, 20-year or 30-year life insurance term policy might be appropriate for you. Or, you may need life insurance to cover only your final expenses. These choices are individual, and for this reason it is smart to consult with a knowledgeable life insurance agent. UNDERSTANDING TERM LIFE INSURANCE Finding low cost life insurance can be a challenge. Term insurance is typically the most affordable type of life insurance because it covers a specific period of time instead of providing “whole life” insurance. If you’re young and on a budget, just starting out with a family, or even if you’re older and only have a limited need for life insurance, then term life insurance may be right for you. WHAT IS TERM LIFE INSURANCE? Term life insurance is simply life insurance for a specific term, such as 5, 10, 15 or 30 years. Many term policies and options are available to choose from, so this type of insurance can easily be tailored to your life insurance goals.

There are several important features of term life insurance:

It offers you great flexibility; you can buy a policy for a term that can range anywhere from a one-year renewable policy, to a 30-year term, or an age-specific time in your life such as 65 years, among other options.
Term life insurance pays out non-taxable death benefits to the beneficiary.
Term life insurance premiums are considerably cheaper than permanent life insurance policies.
The amount of death benefit you choose is also very flexible; you can buy anything from a $5,000 policy to a $1,000,000 policy or more.
When you buy a term policy, the annual or monthly premiums you pay are fixed and guaranteed for the term of the policy. At the end of the term you will be given the option to renew the policy, at which time you can alter it to suit your changing needs.
Many policies also offer you the option of converting your term policy into a permanent life insurance policy such as a universal life policy.
It’s easy to get approval. If you are relatively young and in average health you won’t be required to take a medical exam. Most people simply have to complete a questionnaire to get approval. Even as you get older, medical exams associated with term life insurance are fairly simple and straight-forward. Taking the exam will typically save you money because the insurance company can more fully measure your health risks.

WHY SHOULD I BUY TERM LIFE INSURANCE? Some of the main reasons to buy term life insurance include the following things, all of which can prevent financial burden for your family upon your passing:

Replacement income for your family if you are the primary income provider
Funds to pay off your mortgage
Money for your children’s college tuition
Funds to pay off debts such as credit cards and loans
Expense coverage for your end of life costs and funeral
A financial legacy for your loved ones

ADDITIONAL TERM LIFE INSURANCE TIPS Here are a few other things you should know about term life insurance:

Term life insurance is more expensive to buy as you get older.
If you buy a 10 year term policy and want to renew it at the end of that term, the premiums will be higher than what you were originally paying, so choose the length of the term carefully.
Term insurance is more expensive if you smoke, but you may be able to reduce your premiums if you quit and remain a non-smoker for at least a year.
You can buy term life insurance in most cases up to age 85.

WHOLE LIFE INSURANCE Whole life insurance can help to keep you and your family financially secure. If you’re looking to protect your loved ones and build a savings plan for their future, then a whole life policy may be right for you. This type of policy has a number of benefits as a life insurance solution, and can be used as a savings and investment tool in addition to providing death benefits to your beneficiaries. LIFE INSURANCE FACTS Whole life insurance is the oldest form of permanent life insurance Only 61% of adult American males have some form of life insurance Only 57% of adult American females have some form of life insurance coverage IS WHOLE LIFE INSURANCE RIGHT FOR YOU? Whole life insurance is one of the types of permanent life insurance available. It is quite different from term insurance, which covers you for set number of years and only pays death benefits to your beneficiaries. Whole life insurance covers you for your entire life. In addition to paying death benefits, it also has a cash value accumulation feature which grows over the life of the policy.

Whole life insurance is also different from universal life insurance, which offers more flexibility but fewer guarantees. There are several options for ways to purchase whole life insurance. The main features of this coverage include guaranteed rates, which are not available in universal life insurance. Whole life insurance might be right for someone who:

Is young and just starting out in life
Wants both life insurance and a savings plan
Wants to use life insurance as a financial planning tool
Wants to protect family members from a loss of income as a result of the policyholder’s unexpected death
Wants to pay off a mortgage, outstanding debts, loans or future debts, such as children’s college tuition
Wants to pay for death and funeral costs
Wishes to create an estate or trust

FEATURES OF WHOLE LIFE INSURANCE

Guaranteed interest rate: A guaranteed rate of return for your cash value accumulation that does not change.
Guaranteed insurance premium: Your premium amount, which you pay monthly or annually to keep the policy in force, is guaranteed to remain the same during the life of the policy.
Guaranteed death benefit: The face value death benefit amount you choose is guaranteed.
Cash value accumulation: The tax-deferred cash value which you build in the cash value accumulation portion of the policy is guaranteed.

TYPES OF PERMANENT LIFE INSURANCE There are several types of permanent life insurance, but the two most common policy types offer the most options. These are:

Whole life insurance
Universal life insurance

These life insurance plans have some common features, but there are also some significant differences.

FEATURES OF WHOLE LIFE INSURANCE The main features of whole life insurance include:

Tax deferred death benefits
Level premiums for the life of the policy
Cash value accumulation

FEATURES OF UNIVERSAL LIFE INSURANCE The main features of universal life insurance include:

Tax deferred death benefits
Flexibility to customize your coverage
Options for ways to tailor your premiums

Permanent life insurance provides coverage for your lifetime. There are several types of permanent life insurance, designed to meet different long term financial planning goals. Whether those goals include retirement planning, creating a financial safety net for your family in case something happens to you, donating money to charities or managing your estate, there is a life insurance plan that can be customized to your needs.

WHAT IS PERMANENT LIFE INSURANCE? Permanent life insurance provides a way to secure yourself financially in the long-term while also providing insurance protection for your family. This form of life insurance has several important features that are not found in term life insurance. The main difference between term life and permanent insurance is that term insurance only pays death benefits to your beneficiaries, while permanent life insurance pays out death benefits and accumulates cash value which will continue to build up over the life of the policy.

There are other attractive features of a permanent life insurance policy as well. For example:

It can offer life insurance coverage up to age 100.
It can be a vehicle for estate planning, trusts, or business planning.
It provides a tax deferred cash value accumulation plan.
You can choose locked premiums (whole life), or adjustable premiums (universal life) for the life of the policy.
You can borrow against a percentage of the accumulated cash value as needed.

Permanent life insurance policies can meet several different financial planning objectives:

Provide for long term life insurance needs, even for those who start young
Provide your family with replacement income when the primary income earner passes away
Cover your mortgage, debts, and funeral expenses
Enhance other retirement planning investment strategies
Assist with estate and legacy planning
Provide cash flow to cover expenses in retirement