New & Existing Coverage

During our working years, the primary financial goal is generally to build wealth for the purpose of retirement. During this phase of life, should a death occur to the primary income earner, the surviving family may not have sufficient savings to maintain their standard of living indefinitely. Life insurance can provide an effective solution should this problem occur. So how much coverage and what type do you need?

Determining the amount of coverage needed to replace the premature death of a family member is based on several factors:

• What was the gross and net income of the family member prior to their death?
• What other potential capital losses were suffered due to their death (i.e. Business partnership losses, assets managed by the deceased that now must be sold, etc).
• What are the ongoing current and future liabilities and financial obligations of the surviving family?
• What other special circumstances need to be considered that will create a greater or lesser need for coverage in the event of the family member's death?

Determining the proper type of coverage also depends on several factors. Here are some of the basic types of life insurance plans available:

Term Insurance

Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.

There are two basic types of term life insurance policies—level term and decreasing term.

• Level term means that the death benefit stays the same throughout the duration of the policy.
• Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy's term.

Common types of level term are:

• Yearly renewable term
• 5-year renewable term
• 10-year term
• 15-year term
• 20-year term
• 25-year term
• 30-year term
• Term to a specified age (usually 65)

Whole Life and Permanent Life

Whole life or permanent insurance pays a death benefit whenever you die—even if you live to 100! There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type.

When to buy Permanent Life

Permanent life insurance is generally the most widely used type of coverage for estate planning needs. A major advantage of permanent coverage is that it doesn't automatically expire, making it ideal for long-term planning.

When to buy Term

Term Life insurance can be an excellent option when the purpose for coverage is to protect a family against lost income from the unforeseen death of the family breadwinner or a key employee in a business.

Evaluating Your Existing Life Insurance Coverage

Life insurance policies require ongoing maintenance to ensure they meet their original expectations and remain competitive with current rates.

Combining improvements in the mortality rates with the economic conditions may make it prudent to review your life insurance policies regularly.