Does your policy need an upgrade?
You’ve worked hard to give your family a happy, healthy, secure life. And your family appreciates it. They can sleep easier knowing that you have taken care of everything and that they will be provided for. But is that 100% true? Have you really taken care of everything? If you haven’t reviewed your life insurance policy lately, you haven’t.
Your life insurance policy was probably more than adequate when you first purchased it. But times have changed… the economy has changed… you and your family’s needs have changed… and your policy may be sorely lacking in some areas.
It’s time to talk to your independent life insurance agent about your current situation and see if any of your needs have changed. Right out of the gate you’re probably saying, “But, I’ve been paying on this policy for years – I don’t want to lose my investment in it by making changes.” Well, that’s not necessarily the case – your agent will advise you as to whether it’s best to stay with your existing policy or exchange it for a better one. You shouldn’t lose any prior investments.
Take a few minutes and think about your life. Has anything in your changed? Have you had another child? Quit smoking? Have your debts increased? If you answered yes to any of these items (or related items), then you need to have your policy amended. For instance, your premium may be reduced because you quit smoking or you may need a new, better policy to cover the additional child or debt.
Bottom line is that your independent life insurance agent is there to help and advise you. Get in the habit of reviewing your life insurance policy regularly as a standard routine. It’s always better to be prepared, just in case the unthinkable happens and your family is left without you.
Following are some general tips, do’s and don’ts to use as a guideline:
- DO review your policy regularly. Make note of any major changes in debt, additions to family, etc.
- Make sure your policy covers ALL of your main debts, such as mortgages, credit card debt, loans, etc.
- DO purchase your life insurance policy as early as possible as the rates change as you age.
- Consider putting your life insurance policy in trust so that any pay-outs on your policy are not subject to inheritance tax.
- Think ahead… what will your debts be down the road. Will there be college tuitions? Home improvements?
- DO purchase automatic renewal on your policy as it will then renew regardless of your health situation.
- If you have investments such as real estate, a business or stocks, do purchase a long-term policy or universal life coverage so that any taxes due at death will be paid.
- Quit smoking? Make sure you have your policy amended as your premium may now be lower.
Life Insurance Options
If others depend on you for financial support, part of your financial plan should include how you will provide for them in the event of your death. Purchasing a life insurance policy is a safety net that ensures your loved ones’ future financial obligations are met, covering items such as funeral costs, outstanding debt, estate taxes and everyday living expenses.
If you are married, it’s important for both spouses to have a life insurance policy. If both people bring in an income, a death can be a difficult financial loss. Also, if a stay-at-home parent should pass away, expenses such as childcare and other domestic items can create a financial hardship, too.
There are two basic types offered by life insurance agents: term life insurance and permanent life insurance. The type of life insurance policy that best suits you will depend on your unique needs. To help you decide, we’ve covered the basics.
Option #1 – Term Life Insurance
Just as its name implies, term life insurance covers you for a specific period of time, or term, that you choose. Term Life offers a death benefit but no cash value, so it is an inexpensive way to protect your beneficiaries for a specified period of time.
Term Life is ideal for those who have a temporary need for life insurance protection, for those who need a large amount of insurance protection but have limited cash or for those with specific business needs – such as additional coverage for a key employee.
Renewal term life insurance can be renewed at the end of the term, at the option of the policyholder and without evidence of insurability, for a limited number of successive terms. It can also be converted, or exchanged for a permanent insurance policy, without evidence of insurability down the road.
With term life insurance, once the term expires, your coverage ceases and the policy has no further value. Most life insurance agents know that it’s important to advise that rates generally increase along with the insured’s age.
Option #2 – Permanent Life Insurance
Permanent life insurance is any form of life insurance other than term. Examples are whole life, universal life and variable life. These policies combine term life insurance with a long-term, tax-sheltered savings plan.
Whole life is the most basic type of permanent life insurance. It provides coverage that lasts a lifetime and also builds up a cash value that you can borrow against, withdraw or use to pay future premiums.
A life insurance policy with a cash value is ideal for those who have a lifetime need for insurance protection, prefer stable premiums over the life of the policy or want a policy that allows them to build tax-deferred values and value the high degree of coverage the policy affords. Because rates for a whole life insurance policy remain stable over the life of the policy, premiums are initially more costly than for term insurance.
Life Insurance Benefits
If you’re like most, you think of life insurance as a policy that provides death benefits for your loved ones after your death. That’s the tip of the iceberg as life insurance policies offer multiple added values. In fact, they offer more benefits that most other assets. Forbes online (www.forbes.com) published an interesting article focusing on ways that life insurance can benefit you. Some of their tips are:
Access to Cash. After your policy accumulates, a policy loan becomes available for you to withdraw money for anything you need – from a family necessity like college tuition or home repairs, to financing a business opportunity.
Asset Protection. It offers a financial fallback for your family to help offset estate taxes.
Accumulation. Life insurance cash values are guaranteed.
Flexibility. Life insurance policies allow you to access your accumulated cash value without the restrictions that other assets impose.
Financial Security. After cash values have built up over the years you can access the funds in a few different ways. You could cash in the policy and convert it to an annuity, keep some of the death benefit and access some of the cash or just continue the policy to provide protections for your family.
Insurability. Permanent life insurance that is in good standing (i.e. the premiums are paid) will provide coverage for your entire life, even if your health or personal situation changes.
At ARCW, our knowledgeable insurance agents are here to get you the right policy for your needs. Unlike some of the national insurance agencies, we know who our customers are and work with them one-on-one to get the right coverage at the best price. Contact us today to get your free quote and see how much you could save.