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 What
is life insurance?
Simply put, it's money that an insurance company pays to anyone
you designate, if you die. A life insurance policy can be a very
inexpensive way to replace your income in the event of your death
- it is not an investment and should not be used to fund retirement
or save for your children's future college expenses. There are much
better investment options for those needs.
Do you need life insurance?
That depends on your answers to two more
questions.
- "In the event of my death, will anyone experience an economic
loss or hardship?" If the answer to that question is "yes,"
then you're ready for the second question:
- "Do I care?" If you do, then you've determined that you need
life insurance.
How much life insurance do you need?
Once you've decided that you need life
insurance, you'll want to determine how much insurance you need.
That, of course, is a very personal decision. A general rule of
thumb is that you should have at least six times your annual income
in life insurance. But in determining what is best for you, you'll
also want to consider other obligations you may have and whether
or not you want to have them completely or partially paid for upon
your death. Such expenses include your mortgage, outstanding debts
and future college expenses for your children. Current tuition costs
for a 4 year public university are running about $7,000 per year
while 4 year private institutions are running around $16,500 per
year. When estimating future college expenses be sure to factor
in annual inflation.
What type of life insurance is best for
you?
There are two basic types of life insurance:
term and
permanent. Term insurance is purely life insurance while
permanent (aka "cash value" or "whole life") policies include a
savings element.
You've probably heard lots of sales pitches
and marketing hype regarding cash value polices. But, for the financially
savvy, term is often a better choice - and here's why:
- It's straightforward.
If you die during the term of your policy your beneficiaries
get paid - that's all there is to it.
- It's inexpensive.
You aren't paying anything extra to fund a savings account or
cover investment fees. And because the market is so competitive
for term insurance, companies have a huge incentive to keep
prices low.
- It's easy to shop
for. With relatively little
effort you can comparison shop and assure yourself of a good
deal.
- Term doesn't double
as an investment. There are better ways to save and invest.
- You pay only for
what you need when you need it. You typically need life
insurance coverage for a specific period of time (until the
kids are out of college, for instance).
Disability Income Insurance
Disability income insurance pays you a monthly benefit
to replace a percentage of your income if you're disabled and therefore
unable to work.
What it does:
- It protects your most valuable single asset: your ability
to earn an income.
- It lets you tailor the cost and terms of the policy to fit
your own budget and needs, by allowing you to choose how long
you'll wait after becoming disabled for benefit payments to
begin, and how long the payments will last.
What it doesn't do:
- It doesn't replace your entire paycheck. Most policies will
only cover up to 60% or 70% of your salary.
- It doesn't pay benefits under any and all circumstances. Policies
include a specific definition of "disabled" which you must meet
in order to qualify for benefit payments.
How do you get the best policy at the
best rate?
Request a quote or contact
us.
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