Life & Health

Life insurance is a crucial step in planning for your future and your family’s future. It can fulfill promises and obligations to your family if you are no longer living.

The death benefit is income-tax free and can be used to cover funeral expenses, repay debt, provide education, pay estate taxes or any other expenses your survivors may incur.

Life insurance may also be used to help ensure that a family business will pass to your intended survivor. There are also benefits to certain types of life insurance plans during your lifetime.

How much life insurance should an individual own?

Rough "rules of thumb" suggest an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed.

Important factors include:
• Income sources (and amounts) other than salary/earnings
• Whether or not the individual is married and, if so, what is the spouse's earning capacity
• The number of individuals who are financially dependent on the insured
• The amount of death benefits payable from Social Security and from an employer sponsored life insurance plan
• Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc.

What about purchasing life insurance on a spouse and on children?

In certain circumstances, it may be advisable to purchase life insurance on children; generally, however, such purchases should not be made in lieu of Kids Life Insurance purchasing appropriate amounts of life insurance on the family breadwinner(s). It is of utmost importance that the income earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance before contemplating the purchase of life insurance on children or on a non-wage earning spouse. In a dual-earning household, it is important to protect the income earning capacity of both spouses. Life insurance on a non-wage earning spouse is often recommended for the purpose of paying for household services lost at this individual's death.

Should term insurance or cash value life insurance be purchased?

Although a difficult question ~ one whose answer will vary depending on circumstances ~ several principles should be followed in addressing this issue.
It must first be recognized that in any life insurance purchasing decision, there are at least two basic questions that must be answered:
• "How much life insurance should I buy?"
• "What type of life insurance policy should I buy?"

The question contained in (1) involves an "insurance" decision and the question contained in (2) requires a "financial" decision.

The "insurance" question should always be resolved first. For example, the amount of life insurance that you need may be so large that the only way in which this needed amount of insurance can be afforded is through the purchase of term insurance with its lower premium.

If your ability (and willingness) to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, it is then appropriate to consider the "financial" decision--which type of policy to buy. Important factors affecting the "financial" decision include your income tax bracket, whether the need for life insurance is short-term or long-term (e.g., 20 years or longer), and the rate of return on alternative investments possessing similar risk.

How does mortgage protection term insurance differ from other types of term life insurance?

The face amount under mortgage protection term insurance decreases over time, consistent with the projected annual decreases in the outstanding balance of a mortgage loan. Mortgage protection policies are generally available to cover a range of mortgage repayment periods, e.g., 15, 20, 25 or 30 years. Although the face amount decreases over time, the premium is usually level in amount. Further, the premium payment period often is shorter than the maximum period of insurance coverage--for example, a 20-year mortgage protection policy might require that level premiums be paid over the first 17 years.

Can an existing life insurance policy be used to provide for the repayment of an outstanding mortgage loan?

Yes; the purchase of a new mortgage protection term insurance policy is usually not required by the lender. An existing policy, either term or cash-value life insurance, can be used for many purposes, including paying off an outstanding mortgage loan balance in the event of the insured's death.

Credit life insurance is frequently recommended in conjunction with the taking out of an installment loan when purchasing expensive appliances or a new car, or for debt consolidation. Is credit life insurance a good buy? Life & Health Insurance

Credit life insurance is frequently more expensive than traditional term life insurance. Further, if you already own a sufficient amount of life insurance to cover your financial needs, including debt repayment, the purchase of credit life insurance is normally not advisable due to its relatively high cost.

Life Insurance provides for payments of a specified amount of money upon the insured’s death, either to his estate or to a designated beneficiary. There are two basic forms of life insurance:
1. Term
2. Those with cash value, the best known of which is universal life

Term Insurance offers life protection only and is limited to a specific number of years. It can generally be renewed without a physical examination and, to start with, is usually less costly than straight life. Term insurance is ideal for the person who wants only one thing from life insurance: as much life insurance: as much life protection as possible for the premium dollar at the moment of purchase.

Universal Life cost more than term, but has more to offer. It provides a “forced” savings by building cash value, which can accumulate as a part of your net worth. It also serves as a tax shelter for interest on savings. It appeals to those people who want to make a decision just once and who want their insurance to serve as a savings plan too.

Annuities

Annuities are financial contracts between you and an insurance company. You give the company money now and the company pays you an income at a later time. Annuities can be useful retirement tools. While annuities are not insurance policies, they are issued by insurance companies.

An annuity is similar to a retirement plan in that you can fund it in a lump sum or a little at a time, and all capital in an annuity grows and compounds tax-deferred until you begin making withdrawals. Unlike retirement plans, however, there is no limit as to how much you can invest in annuities!

Long Term Care

Long-term care has been defined as "medically necessary assistance, recommended by a physician for the treatment of a chronic illness or debilitating injury on a long term basis. Recovery is usually not expected. Care is oriented toward helping a person function, not toward a cure."

Long-term care is typically not covered by your health plan, disability coverage or Medicare. Medicaid does cover long-term care, but only after you have used up all your assets paying for care.