Maximize protection at the lowest short-term cost. Coverage for a set period and an option to renew is based on factors such as health, age and insurability.
Guaranteed rates, coverage and cash value. Compared to term insurance, higher start-up cost but may be cheaper in the long run.
Being prepared for retirement isn’t just about saving, it’s also about generating an ongoing income so you can retire with confidence.
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Your need for life insurance varies with your age and responsibilities. It is a very important part of financial planning. There are several reasons to purchase life insurance. You may need to replace income that would be lost with the death of a wage earner. You may want to make sure your dependents do not incur significant debt when you die. Life insurance may allow them to keep assets versus selling them to pay outstanding bills or taxes.
Consumers should consider the following factors when purchasing life insurance:
All policies are not the same. Some give coverage for your lifetime and other cover you for a specific number of years. Some build up cash values and others do not. Some policies combine different kinds of insurance, and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. There are two basic types of life insurance: term insurance and permanent insurance.
Term insurance generally has lower premiums in the early years, but does not build up cash values that you can use in the future. You may combine cash value life insurance with term insurance for the period of your greatest need for life insurance to replace income.
Term insurance covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally offers the largest insurance protection for your premium dollar. It generally does not build up cash value.
You can renew most term insurance policies for one or more terms, even if your health has changed. Each time you renew the policy for a new term, premiums may be higher. Ask what the premiums will be if you continue to renew the policy. Also ask if you will lose the right to renew the policy at a certain age. For a higher premium, some companies will give you the right to keep the policy in force for a guaranteed period at the same price each year. At the end of that time you may need to pass a physical examination to continue coverage, and premiums may increase. You may be able to trade many term insurance policies for a cash value policy during a conversion period even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.
Insurance agents sometimes refer to term insurance as “temporary” because the term policy lasts only for a specific period. It is probably no more “temporary” than your auto or homeowner insurance. Just like term, those types of policies provide coverage for a specific period of time, and must be renewed when that period ends.
An agent may believe term is risky, but only because you could have a hard time buying a policy in the future if your health deteriorates or you cannot afford the higher premiums. Commissions could also be a reason for an agent who discourages term. The agent often makes less money for selling term than for other forms of life insurance.
Permanent insurance (such as universal life, variable universal life and whole life) provides long-term financial protection with guarantees not offered by term policies. These policies include both a death benefit and, in some cases, cash savings. Because of the savings element, premiums tend to be higher.
Universal life insurance (often shortened to UL) is a type of cash value life insurance, primarily in the United States of America. Under the terms of the policy, the excess of premium payments above the current cost of insurance is credited to the cash value of the policy.
Variable universal life insurance is a life insurance product with investment features. It’s designed to help you protect your family’s future with life insurance – and give you access to professionally managed investments that can help you accumulate money for your future needs.
You can use the policy for many of your planned financial needs, such as supplemental retirement planning solutions, business planning solutions, long-term care and education funding.
Ask yourself the following questions:
Some insurance experts suggest that you purchase five to eight times your current income. However, it is better to go through the above questions to figure a more accurate amount.