Life Insurance FAQ
How much Life Insurance do I really need?
This really depends on where you are at in what we call your “life stage”. How old are you, do you have a family, are you the main breadwinner are some of the questions that your insurance agent should ask you to get the conversation started. Also it depends on your current health at the time of application. Click here to use a calculator that can give you a ROUGH IDEA of how much a life insurance policy could cost you. We highly recommend that you sit down with a licensed agent and go over your finances and goals to make sure that you have the right amount of life insurance for your family. Remember, life insurance isn’t for you, it’s for your family.
What about life insurance for kids? I have mixed feeling on this, what are the pros and cons?
Usually when talking to a financial advisor or estate planner they will ask you… what will happen to you if your child passes away or become seriously ill? Well, besides going through the immense grief of losing a child, you have the financial dynamics. Do you have enough in savings to cover a funeral and possibly any more time off that goes above and beyond your paid time off at work if you need it. These are things to consider and a reason to purchase a life insurance policy for your child.
Another reason is to lock in what we call “insurability” which simply means depending on the type, once you purchase a life insurance policy for your child they will always have it. Now if your child does become seriously ill or for instance is diagnosed with diabetes, your child can now keep the life insurance in force as they grow up. Some polices have riders you can add on that will add more onto the death benefit without having to prove insurability (go through any tests or answering any questions). Think of it as a gift you can give your child later in life.
Here is an example; Sally Smith purchased a whole life insurance policy for her son when he was born. When he turned 15 he unfortunately was diagnosed with type 2 diabetes. If he were to try to purchase a life insurance policy when he was an adult, the premiums would be very high if he is able to at all. Again life insurance isn’t for you, it is for your loved ones.
My child is going off to college in the fall and we co-signed on his student loans, I heard that we may be held accountable for his student loan debt if something were to happen to him?
Well I would for sure read the student loan documents and consult your child’s financial aid office to see if the loan will be forgivable at death. If not, then yes the assumption would be that the co-signer, in this case the parents, would be liable for any unpaid tuition. With this said, it might not be a bad idea to speak with your insurance agent or financial advisor and look into purchasing a life insurance policy – even if it is just a term policy for the length and amount of the loan.
I have a life insurance policy through my employer, and I bought more death benefit on top of what is offered to the employees, do I have enough?
We always recommend sitting down with your financial adviser or insurance agent and going through your finances to be sure that you have enough life insurance for you and your family. With this said if your employer had a life insurance policy that they give employees, we say great! Should you add on more to your employers’ life insurance policy for yourself? Well, just keep in mind that you do not own that policy, your employer does. So, any decisions to change the policy is theirs to do so or if you leave your job – you won’t have it any longer. We always recommend having a life insurance policy that you own on top of what your employer may give you. This way as the policy owner, you are in control of the policy.
What are the different types of life insurance policies?
Permanent Insurance offers lifelong protection, and you can accumulate cash value on a tax-deferred basis. This cash account can be used for a variety of purposes, from helping you out of a tight financial spot, to providing funds to take advantage of an opportunity, to supplementing your retirement income. The downside? Initial premiums are considerably higher than what you would pay for a term policy with the same face amount.
Term Insurance provides protection for a specific period of time-the “term” – and is designed for temporary circumstances. It makes the most sense when you need coverage will disappear at some point, such as when your children graduate from college or when a debt is paid off. The most common term policies provide coverage for 20 years but they can also run the gamut from one year policies to terms of 30 years or even longer. In some cases, a term policy may also be converted to a permanent policy. **
What if I change jobs, would the life insurance policy that I had through my previous employer follow me?
It depends, the best way to confirm is to speak with either your human resources department at work or the insurance company that actually holds the policy.
What is a mortgage insurance policy?
The best way to describe this type of policy is, it is like a term policy that starts our with the death benefit matching what the mortgage is… then as the policy ages and the mortgage is paid down the death benefit decreases as well.
Can I really build cash up in a life insurance policy? How does that even work?
Yes, you can and there can be some significant income tax advantages depending on the structure of the policy and the type of permanent policy that you have. Your best bet would be to consult with your insurance agent and/or financial advisor.
Do you have more questions or are you are ready to look at starting your own life insurance policy? Contact our Life Insurance Agent, Chuck May at CMay@MillerSchuring.com or by calling 269-381-9442.