By Megan Cooney, Marketing Assistant
Is it possible to insure the love you have for your family? How can you make sure your loved ones are protected and financially secure even after your death? Life insurance is an investment that ensures your family has the coverage they need in the event of your passing. The main reason that 75 percent of Americans said they invest in life insurance is because they love their family, according to a 2011 Barometer Study conducted by LIMRA and the LIFE Foundation.
“People want life insurance for a number of reasons,” Richard McGrath, President and CEO of McGrath Insurance Group, said. “It can be used to help pay off a mortgage or loan; towards debt liability, or any debt incurred that is passed onto the surviving household members; estate conservation; towards long-term care policies; and as income replacement when the breadwinner has passed away.”
Before purchasing a life insurance policy, you need to determine how much coverage you will need. The important thing to keep in mind is that you are planning for how much money will be needed to cover future expenses. This amount encompasses income, expenses, and assets, both current and future.
“You are pricing for the unknown,” McGrath said. “And with life insurance, you don’t want to be taken advantage of. You want to do it right. That is why we conduct a needs analysis, considering all the different options, and what you can afford to spend.” There are two types of life insurance: term and permanent.
Term insurance has a beginning and an end. It is best used for coverage needs that will disappear over time, such as with a mortgage, loan, or college education expenses. These are debts that can be paid off over a designated period of time. Term policies usually average around 20 years, but can range from a one year policy to 30 years or more. Although the initial premiums for term insurance are the lowest, they increase with age, and no cash value accumulates.
Permanent life insurance comes in three different forms: whole life, universal life, and variable life. Investing in a permanent life policy guarantees your protection for life and accumulates a cash value over time. However, the premiums are more expensive than term policies.
A universal life policy is the least expensive as far as permanent life policies go. However, this type of policy operates as an annual renewal term (ART). This means that each year, your premiums will increase as your age increases. There is a cash value on universal life, but once you reach a certain age, this value can decrease again, unless a paid addition is added to the policy. Premiums can be flexible, and death benefits are guaranteed as long as your premiums are sustained.
Although the initial premiums may be higher on a whole life policy, the benefits seem to outweigh the price, for you and your family. A whole life policy is an investment for life, and the premiums remain level, even as you get older. Both death benefits and cash values are guaranteed, and the accumulation of cash value is significant and continues to increase as you age. One of the benefits of purchasing life insurance through a mutual insurance company is that you will receive dividends. Also, the cash value is tax-deferred.
With life insurance, it is better to invest when you are young and healthy. For more information on life insurance or to determine the amount of life insurance you need, contact McGrath Insurance Group’s Life & Related department at 508-347-6850.
*This article is written for informational purposes only and should not be construed as providing legal advice.