When trying to map out your family’s long-term future, it is important to consider the plans you have already set in motion today, and those that you may want to put in place down the road. Life insurance is one way to ensure these plans stay on track if you were to die before you are able to realize your dreams.
The first question you may be thinking is, “Do I really need Life Insurance?” But it is important to remember that the answer to this question can vary from person to person. So, the question you should really be asking yourself is: “What If I die without Life Insurance coverage?”
Now, if you don’t have any children or dependents who rely on you financially, you may not need to purchase Life Insurance; as the main purpose of Life insurance is to help avoid financial hardship for your loved ones in the event of your premature death.
However, if you do have financial dependents, and you were to die today with no solution in place, all your plans could grind to a screeching halt. Whether it’s funeral expenses or an outstanding mortgage you are worried about, investing in Life Insurance can help your loved ones tie off your loose ends in these situations.
In reality, buying Life Insurance doesn’t actually protect you; since you won’t be around to receive or spend any of the payout from your policy – which is also known as a Death Benefit. These policies are primarily designed to help spare your loved ones the excessive financial burdens that come along with settling your affairs after you die.
There are two main types of coverage available for you to choose from: Term Life Insurance, and Permanent (or Whole Life) Insurance.
1. Term Life Insurance plans will cover you for a term of one or more years; but the death benefit will only be paid if you die within your specified term period. Before you raise your eyebrows in disbelief, it is important to note that, if you don’t die while your coverage is in force, you haven’t wasted your money any more than when you buy car insurance and never have an accident. Purchasing coverage simply brings you peace of mind that, should the worst occur, your beneficiaries will receive a payout if your coverage is in force at that time.
Term plans usually come with the lowest monthly premiums; and are probably your best option if you are working with a limited budget – or if you only need coverage for a specific period. If you need coverage to extend beyond the time period specified in your policy, you can renew your coverage for one or more terms even if your health changes – BUT REMEMBER…each time you renew your coverage; your monthly premium amount will increase.
There are four kinds of Term Life policies, and they all function differently:
- With Level Term plans, the death benefit amount and premiums remain the same for the entire term. Depending on the plan, your premiums may be subject to an increase at renewal.
- With Decreasing Term plans, the death benefit amount decreases over time; but your premiums will remain the same throughout the term. This coverage is often useful for people with financial obligations that decrease over time – such as with mortgage payments.
- With Annual Renewable Term plans, the death benefit amount remains the same throughout the term. These plans must be renewed annually, and the corresponding premium amount will increase each year as you get older.
- With Convertible Term plans, you can convert your temporary coverage into permanent coverage without having to undergo a medical exam, or any further underwriting. However, this conversion may come with a premium increase, depending on your plan.
2. Whole Life Insurance plans provide life-long protection, along with an opportunity to accumulate Cash Value over time. Your cash value may be used in several different ways, like taking out a loan, or taking what is known as a Premium Vacation – using the cash value in your policy to cover your premiums if you run into financial difficulty for a period of time.
But which coverage is better for you: Term Life Insurance or Whole Life Insurance? This question has been debated for years!
For most, Term Life Insurance is the preferred choice because it offers the most significant benefit amount at the lowest price. And, since most expenses aren’t permanent (i.e. a mortgage or school fees), purchasing the most coverage while your family is young may be the more sensible option.
A Whole Life Insurance plan may be best used as an investment vehicle for estate planning and protection, or to provide funds to your loved ones to cover your final expenses.
To learn more about how you and your family can benefit from Life insurance, contact Damir Armstrong – a Life Sales Agent at Freisenbruch-Meyer – via email at darmstrong@fmgroup.bm, or give him a call at 294-4616.
75 Front Street, Hamilton
(441) 296-3600
fmgroup.bm
