By Diana Palmieri
As this first month of the new year goes by, I hope you’ve considered reviewing your life insurance needs. I am going to touch on some different types of insurance and what they could mean to you and your family.
Quite possibly, some of you could have life insurance through the job. Part of your new year’s checkup is to see how much you have, how much your premium is, and how long it will last. A lot of folks who come into my office don’t realize how much they have and how long the coverage lasts within their group plan. Because you are part of a group and are paying group rates, you are also taking on the health problems and issues of the members in the plan. You might want to look into some individual rates based on your health, your family’s medical history, and whether you smoke or not. If you know that you can’t get life insurance out of the group plan, then obviously you should stay in the group plan.
Term life insurance
The most inexpensive form of insurance is term life. It’s very vanilla cone: A premium is paid for a set amount of benefit and the term expires. You can go for as little as 10 years up to 30 years. Obviously, the younger you are the less costly the premium. Your health and family history also play roles in determining the premium. Since term policies cover a set amount of years, after the term expires, your assets, namely your home and retirement plans, should have accumulated in value to cover you in your golden years to replace the term policy.
There are even some forms of term insurance that will return your premium to you at the end of the term. Buyer beware, though: These are more expensive than a regular term policy. Term insurance is great if your need for insurance will decline or be eliminated over time.
Convertible terms allow you to lock in your insurability (meaning how you are rated by the company) for life if you need it, without having to take another medical exam.
Universal and whole life insurance
Not vanilla cone, but a bit more complicated and expensive, are forms of permanent insurance called universal and whole life. Some folks choose these policies for reasons such as paying for final expenses and medical bills, covering estate taxes, and even as an alternative to long term care insurance. Universal life premiums and benefits are flexible, and you accumulate a cash value that earns interest. Interest and dividends are determined by the insurance company. The cash value can be used in some instances to pay your premium or take the form of a loan. Universal policies can be guaranteed and nonguaranteed.
Whole life insurance was the first product to provide permanent protection, and it has cash values. A whole life policy will usually guarantee coverage through age 100 and have a guaranteed cash value that equals the death benefit at age 100. As long as the whole life premium is paid each year, the policy will remain in effect. Generally, these policies can be complicated and come in many shapes and sizes. If used the right way, they can work depending on your individual future needs. A knowledgeable agent can help you determine what is best.
For further information, please visit http://www.insureuonline.org/insureu_library.htm. This Web site is a service of the National Association of Insurance Commissioners (NAIC) and can help you further research and answer many questions about life insurance. Also visit your state’s insurance Web site as well. For my friends outside of the United States, visit your country’s government site. I visited a few such as the UK and Canada and was able to find some facts and guidance.
I can’t think of a better time to think about this most important aspect of your financial planning. Happy and Healthy New Year. Stay Safe!Diana Palmieri is dually registered with Vanderbilt Securities LLC and H Beck Inc., which are unaffiliated. Securities offered through Vanderbilt Securities LLC, member SIPC/FINRA/MSRB.