Life Insurance

How much life insurance do I need?

Shocking as this may sound coming from an insurance agency, maybe none! If you are single and don't have anyone you wish to leave money to and don't have debts to burden anyone with then you probably don't have a need for life insurance. However, if you have dependents or wish to leave a legacy to someone then life insurance can fill the need.

The amount you need is not an easy answer. Frequently you will hear five to six times your annual income is the amount you should have. But there are so many factors that need to be considered there is no single answer. That is why we have provided a life insurance calculator to help you decide on the amount. Even better call us and one of our associates will be more than happy to assist you.

Which type of life insurance is best for me?

Life insurance comes in two basic types: term and cash value.

Term Life Insurance

Term Life Insurance is similar to renting a house, as long as you pay the rent you can live in the house for the term of the lease. When the lease is up you either renegotiate a new lease or you move on. So with term insurance you have it for a specific term as long as you pay the premium.

Term insurance usually comes in 1, 5, 10, 15 and 20-year policies. The longer the term the more expensive the policy.

Term insurance works best if you have a specific need such as providing money until your children are out of college or until your mortgage is paid off.

Advantages
Disadvantages
Low initial cost
Cost goes up over time
Good for specific periods
Costs become very high at older ages
 
Must requalify at renewal

Cash Value Life Insurance

Cash Value Life Insurance comes in many different types. Whole Life, Universal Life and Variable Universal Life are the most common types.

Cash value life insurance is like buying a house: not only do you get to live in the house but your payments are fixed and you own it when you have paid off the mortgage. As with buying a house you build equity that you may borrow if the need arises.

With Whole Life part of your premium pays for the cost of insurance and the remainder is invested by the insurance company, usually in bonds or mortgages. Once the policy is paid up you never have to make another premium payment and the death benefit is guaranteed.

Advantages
Disadvantages
Fixed premiums
High initial premiums
Builds cash value
Little cash value in the early years
Policy can become paid-up
Rate of return may be low
You never have to requalify
Premiums may not vary

Universal Life differs from whole life in two distinct ways: you may vary the premium you pay and the policy never becomes paid-up. With universal life the insurance company guarantees a fixed interest rate on the policy each year.

Advantages
Disadvantages
Lower premiums than whole life
Higher premiums than term
You may adjust premiums
Interest rate will vary with the economy
Can build cash value
Premiums may increase in later years
You never have to requalify
Policy never becomes paid-up

Variable Universal Life is like buying term insurance and investing the difference. Your premium pays the cost of insurance and the excess is invested in accounts that are very much like mutual funds. You get to select which accounts you want your money invested in. Often the managers of these accounts are well known fund companies such as Janus, Fidelity and Goldman-Sachs, to name a few.

Advantages
Disadvantages
Adjustable premium
Higher premiums than term
You select investment accounts
You take investment risk
Can build higher cash value than other policies if accounts do well
Premiums may increase in later years if investment accounts don't do well
You never have to requalify
Policy never becomes paid-up

For further information on Life Insurance Plans Contact Us.