LIFE INSURANCE Q & A – A BUYER’S GUIDE
How much life insurance do I need? In a typical family situation, we recommend, at a minimum, having enough to pay off all indebtedness – home, auto, etc. While this provides a “clean slate” at that point, there are still substantial day-to-day living expenses and maybe education costs to consider. Will there be an adequate income or does it need supplemented? Will social security or employment-related benefits be available? In most cases, we find the resources available just aren’t enough to provide a middle-class lifestyle. Failing to plan ahead can be financially and emotionally devastating to the family that must carry on after the death.
What type of life insurance should I buy? Most answers one receives with this question are skewed heavily toward a saleperson’s anticipated commissions – unfortunately. Frankly, we feel if we truly provide value for our clients, compensation isn’t an issue. We recommend the following type policies depending on the circumstances of a situation:
Term Insurance – Simply speaking, it pays a death benefit if one dies during the term of the policy. Term periods available range from 10 to 30 years depending on the age at purchase. At the end of the term coverage ceases without further benefit.
Term Insurance with Return of Premium - Same as the above except at the end of the term all premiums paid are returned to the policyowner. There is a valuable option to take a reduced death benefit policy which is paid up for life instead of the premium return.
Guaranteed No-Lapse Universal Life – This provides a permanent benefit until death, regardless of age. It’s similar to term insurance as it’s pure protection, however the benefit never ceases. Premiums can be structured to “pay up” the policy by one’s retirement or other date. There is no cash buildup like whole life. We don’t advocate life insurance as an investment or savings vehicle. The function of life insurance is to deliver a death benefit to a beneficiary.