Life Insurance

Your family counts on your every day for financial support: food, shelter, transportation, education, and much more. You and your spouse have plans for your future and dreams for your family: another child, a bigger income, a new business, college education, travel, and retirement . . .

Whatever the reason, as life expectancies increase for Americans as a whole, today it is not uncommon for many people to find themselves with more, not fewer, responsibilities, as they grow older.

Life insurance is all about making sure your family has adequate financial resources to make those plans and dreams come true, if you were to die prematurely.

Contrary to what some people may think or wish for, there’s no magic age at which you no longer need life insurance . . .no specific date when you should automatically cancel or reduce the amount of coverage you carry. It all depends.

The main goal of life insurance is to provide monetary resources to your family, business associates, or other beneficiaries in the event of your death so they can carry on with minimal financial hardships.

And just as your spouse and children (as beneficiaries) count on you, you count on your spouse. That’s why coverage for your spouse is also important. If he or she were to die unexpectedly, you would feel similar financial strains. This is especially true today, with so many “double income” families.

Whether you have young children or are faced with the care of aging parents, whether you’ve recently expanded your business or just purchased a vacation home with your eyes on retirement, when was the last time you review your life insurance portfolio? Has inflation—even today’s low rates—or benefit reductions taken a chunk out of the value of your insurance?

One thing’s for sure, on an average many Americans don’t seem to have enough! According to the American Council of Life Insurance, insured households had an average of only $179,000* of coverage in 1998. That works out to a financial cushion of just three years of disposable personal income* per household. Not much time for a surviving spouse to get back on his or her feet financially after the death of a partner.

Just as you probably do year after year with your benefits package at work or your retirement savings, you need to periodically assess your life insurance coverage and consider whether you have enough, too much, or the right kinds to meet your current and future needs.

As a rule of thumb, many financial planners recommend life insurance coverage equal to five to nine times your gross annual salary. (Use one of the higher multiples if you have younger children.) The same applies to your spouse.

So, which type of coverage is best for you?

Term Life Insurance is life insurance for a set period of time. If the insured dies during this period, the beneficiary receives a lump sum of tax-free money. Term Insurance is ideal for young families with a limited budget where as much insurance as possible is required to secure the family’s well being, or in business situations such as buy-sell agreements, for mortgage coverage, or to fulfill other temporary needs.

Whole Life Insurance provides permanent coverage with level premiums and a guaranteed death benefit. It is perfect for people who think long term and wish to have a plan that is not subject to investment gains and losses. The policy also gains cash value over time, allowing for flexible cancellation options. Furthermore, though coverage is life-long, you do not have to pay premiums for life. You can purchase the insurance in a predefined number of payments, the shorter the payment period, the larger the discount.

Universal Life Insurance is permanent insurance with the added feature of having a tax-sheltered investment portion built into the plan. Universal Life pays off precisely at the moment when significant costs and tax implications are triggered. This timing, along with the tax-sheltered savings feature, make Universal Life Insurance a powerful financial tool in estate preservation and leveraging, buy-sell agreements, charitable giving, and pension maximization. The tax-sheltered status of it’s investments component can also allow it to help pay for itself.

The fact is there’s no “one size fits all answer” when it comes to life insurance. You need to examine all options available to you, weigh the benefits, and make a selection based on your needs. Sure you want to look at the premium, but you also want to consider each product’s features such as conversion privilege, renewability, termination, benefit amounts and so on.

Life insurance is not something you buy once and forget about. As your responsibilities grow—bigger family, higher income, greater debt—you need to periodically evaluate and, if necessary, upgrade your coverage. If you’re under-insured or if you haven’t begun to build a base of life insurance contact Freedom Benefit Solutions.

*1999 Life Insurance Fact Book, American Council of Life Insurance.