Life Insurance Policies

Term life insurance provides coverage for a certain period. You choose the period when you buy the policy. Common terms are 10, 20 or 30 years. The policy does not build cash value. Typically, the death benefit and the premium do not change during the term. If you have a term life policy and pass away within the term, your beneficiary receives the payout. Term insurance is usually the least expensive type of life insurance. Whole life insurance provides coverage spanning the insured’s life. Whole life includes a component known as the cash value. The cash value grows at a tax-deferred declared rate throughout the life of the insured. You can borrow money against the cash value of the account, but if you do not repay the cash value loan and interest the death benefit will be reduced upon death of the insured. The monthly premium and death benefit are generally guaranteed throughout the life of the policy.

As with all types of insurance, life insurance fits a need. A simple calculation to determine the amount of life insurance you need is simply to multiply your household income by ten. A better way to determine how much life insurance you need is to first calculate your obligations: Add your annual salary times seven (seven years of income replacement) plus your mortgage balance and your other debts including future needs such as college and funeral costs. If you’re a stay-at-home parent, the average annual income value is approximately $115,000. From that figure subtract liquid assets including savings, existing college funds, life insurance and other liquid assets. Round that number to the next $1,000 and that is the amount of insurance you need. Our agents are here to help you determine how much you will need to give your family peace of mind.

Just as you did when you purchased the policy, you should examine the policy to see if it currently meets your needs. If the death benefit of the old policy does not meet your needs, a new policy should be started to replace or in addition to the prior coverage. In some cases, the cash value from an old whole-life policy can be used to purchase a paid-up policy in which no premiums are due. If the need no longer exists, then you can simply cancel the policy. In any case, you should review the beneficiaries periodically to ensure your wishes are carried out when the time comes. Your will or trust will not override what is named in the beneficiary designation on a life insurance policy, annuity, or retirement account. Can you imagine your ex-spouse or their children collecting your life insurance benefits because you forgot to review your beneficiaries? Make an appointment with one of our experienced agents to discuss, update, or make changes necessary to carry out your fish wishes.

Mortgage life insurance is a policy sold by your mortgage company or bank that pays off your mortgage upon your death. The beneficiary of this type of policy is almost always the mortgage company. Mortgage life insurance is very similar to term insurance. In this case, term insurance may work out better for your loved ones to receive the proceeds themselves, giving them the choice of whether to pay off the mortgage as there may be other pressing bills to pay. Term life insurance sold in the open market is often more competitively priced and allows you to name your children as the beneficiaries, rather than the mortgage company. Unless you have been denied term insurance, mortgage insurance should be used secondarily to term insurance.

Even though your term may be ending that doesn’t mean your coverage will necessarily end. In some cases, you will be allowed to continue the coverage, but at a rate based on your age when the policy renews. For instance, if you took out a 10-year term policy at age 30 and were approved at a select rate when the term ends your policy will continue for another 10 years, but at a premium rate of a 40-year old at the select rate. You may also have the option to convert a term policy to a permanent policy. Call us today so that we can help you decipher your options.