Life Insurance 2020
Life insurance is not an exciting topic to discuss because it forces us to think about our mortality. It forces us to think about the people we love so much and how we see them getting along without us in the picture. Isn't this the reason why many people haven’t taken the time to review what they own?
Over the last few years, life insurance is one thing that generally has actually gotten cheaper - and improved in many ways. Changes in interest rates, mortality rates and the regulatory environment make today’s products much different than they were even a few years ago.
There are many options in the market today that feature longer guarantees, more flexible premiums, and additional features and benefits that were mostly not available until recently. Reviewing your life insurance doesn’t have to mean buying more insurance.
Much like any other part of your financial strategy, it needs to be something that works perfectly – for your situation.
Current Life Insurance Owners:
Ask yourself. Do you:
Have what you need?
Have what you think you have?
Have the lowest cost, or highest performing product available to you?
Consider an analysis of your current coverage:
Do you currently have the appropriate amount and type?
Whether you need more or less, is there anything better available?
Why Do I Need Life Insurance?
You are Single
Some single people provide financial support for aging parents or siblings. Others may be carrying significant student debt that they wouldn’t want to pass on to family members who survive them. If you’re young and healthy your insurability is at its peak and you’ll be rewarded with the best rates on life insurance.
You are a Single Parent
As a single parent, you’re the caregiver, breadwinner, cook, chauffeur, and so much more. With so much responsibility resting on your shoulders, you need to make doubly sure that you have enough life insurance to safeguard your children’s financial future.
You are Married
Think you don’t need life insurance if you don’t have children? Would your spouse be able to pay off debts like credit-card balances and car loans, let alone cover the monthly rent and utility bills?
You are Married with Children
Most families depend on two incomes to make ends meet. Could your family maintain their standard of living on your income alone? Would your children be able to attend college? Life insurance protects your family’s financial future.
You are a Stay-at-home Parent
Childcare and household activities are all important tasks, the replacement value of which is often severely underestimated. Could your spouse afford to pay for these services if you were gone? With life insurance, your family can afford to continue their quality of life.
You have a Special Needs Child
Planning for the future of an individual with special needs is important. It requires in-depth knowledge of the federal laws as they pertain to government benefit eligibility and legal documents such as special needs trusts and guardianship.
You are a Small Business Owner
A life insurance policy can be structured to fund a “buy-sell” agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. The owners would get the business and the family would get the proceeds. “Key person insurance” protects a business in case of the death of a key employee. It is payable to the company and provides the owners with the financial flexibility needed to either hire a replacement or work out an alternative arrangement.
You have Grown Children
Just because the kids are through college and the mortgage is paid off doesn’t necessarily mean that Social Security and your savings will take care of whatever lies ahead. Life insurance would enable your spouse to maintain the lifestyle you worked so hard to achieve and would allow you to pass on something to your heirs.
You are Retired
Depending on the size of your estate, your heirs could be hit with a large estate tax payment after you die. The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of estate taxes, funeral costs, and other debts without having to hastily liquidate other assets, often at a fraction of their true value.
Types of Life Insurance - Which is right for you?
Term life insurance is like renting an apartment. You lock in the premium for a set amount of time and when that future time comes, you can either renew for another term or the coverage simply ends.
Term does not build any cash value which contributes to term life insurance being the lowest cost type of life insurance. You only pay for the death benefit, the set amount of money to provide for your loved ones when you die. Term works like car insurance or homeowners insurance in that it only pays when the unforgettable happens.
Whole life insurance is like owning a house. Again you lock in the premium at the start of the policy but some of your payment goes toward the death benefit while some goes toward your "cash value." The longer you own the policy, the more the cash value builds. Because whole life grows a cash value which can give you options down the road, the cost is usually higher than term.
Universal life insurance has a death benefit and a cash value like whole life. Unlike whole life, you are able to adjust your premium payments based on how much cash value is available. You still make premium payments but you may be able to reduce the payment temporarily or altogether over time.
Universal life insurance can provide tax free income in retirement when used properly in the right situation. Give us a call for professional help when analyzing this kind of insurance because of the complexity of the strategies involved. They are not right for everyone.