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You should also plan to replace “hidden
income” that would be lost at death. This would include
income you receive through your employment that is not part
of your gross wages, such as your employer’s subsidy of your
health insurance premium, the matching contribution to your
401(k) plan, and many other “perks”. The cost of replacing
your health insurance and retirement contributions alone could
be the equivalent of $2,000 per month or more.
Of
course, you should also plan for expenses that arise at death.
These include funeral costs, taxes and administrative costs
associated with “winding up” an estate and passing property to
heirs. At a minimum, plan for $15,000 -$30,000.
In most
cases, if you have no dependents and have enough money to pay
your final expenses, you may not need life insurance. If you
want to create an inheritance for loved ones, pay off credit
cards and mortgages, or make a charitable contribution, buy
enough life insurance to achieve those goals.
What are the principal types of life insurance?
Term Life Insurance
Term
Life insurance is the simplest form of life insurance. Term
policies can help meet a wide variety of business and personal
needs and provides the most coverage for your premium dollar
for a set period of time. It is well suited for goals such
as coverage to pay off a loan, fund a buy-sell agreement or
provide life insurance during child-raising years. Term
insurance is commonly used as mortgage insurance, fully paying
off the mortgage in the event of death. Most companies
provide level premiums for 5, 10, 15, 20 or 30 year periods.
Alternate benefit periods are also available. Term life
insurance provides a death benefit only if the insured dies
during the specified period.
Permanent Life Insurance
Permanent life insurance is a form of life insurance where the
policy is kept for the life of the insured, the payout is
assured and the policy accrues cash value as long as the
policy and premium payments are kept current. Whole life
policies are designed to offer cash value accumulation and a
consistent premium. Some customers want more flexibility
which can be obtained in the form of universal life
insurance. Universal life allows consumers flexibility of
premium payments and borrowing provision. Variable life
insurance shifts the investment risk to the consumer. Cash
value fluctuates based on the performance of investment
options that you choose. Variable life offers a choice of
death benefit options and the potential to accumulate
non-guaranteed tax deferred cash value.
Permanent life insurance programs are designed
to remain in force until the death of the insured; therefore
the cost is considerably higher than term insurance. Term
insurance is referred to as pure death benefit with no cash
accumulation vehicle tied to it. Most people are drawn to
term insurance for the low cost and the ability to invest the
difference in separate financial products. Doing so may have
some drawback because all term policies eventually expire.
Clients would then have to re-qualify for a new policy which
may have higher costs due to changes in age and health
factors. In cases of insurability or severe changes in
health, some Term life policies may be converted to Permanent
life policies without evidence of insurability. In the
event policies become unaffordable, there may be options to
sell the policy for a percentage of face value or cash value.
You should review all of your insurance needs at least once a
year. If you have a major life change, you should contact our
office. The change in your life may have a significant impact
on your insurance needs. Life changes may include:
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Marriage or divorce
-
A
child or grandchild who is born or adopted
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Significant changes in your health or that of your
spouse/domestic partner
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Taking
on the financial responsibility of an aging parent
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Purchasing a new home
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A
loved one who requires long-term care
-
Refinancing your home
-
Coming
into an inheritance
-
Inability to continue premium payments
Our dedication to provide superior
service to our clients speaks for itself as many of our
customers have been partners with us for many years.
Please contact us to quote your business and allow us to be
your partner for all of your insurance needs. To obtain
more information, please contact Laura Traeger
ltraeger@kahn-carlin.com
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