By Not all life insurance policies are the same. We can help find the right fit for your family.
Each September is designated as Life Insurance Awareness Month by LifeHappens.org, and we take the opportunity to further educate our client families by sharing stories and information.
By now, we hope you’re aware that nearly everyone should consider some type of life insurance. But you might be wondering about the different types of life insurance coverage, and the process for obtaining the policy that’s right for you.
Types of Life Insurance Coverage
First, there are two main types of coverage for you to consider: group or employer-sponsored life insurance. Emmployer-sponsored life insurance is coverage that you sign up for with your employer’s human resources office, along with other employee benefits. Some employers offer basic plans at low or no cost to you, as well as options for more coverage at a higher cost. We can help you sort through what your employer offers if you’re not sure what you’re looking at. The second main type of life insurance is individual coverage. This is purchased through an insurance company for yourself or a loved one.
Types of Life Insurance Policies
The most basic policy you can buy is term coverage, meaning that you lock in a certain premium rate for a certain period of time, typically 5, 15 or 20 years, or until it’s needed. Many people, after maintaining this type of policy for a number of years, opt to convert a portion to whole or permanent life insurance, which is guaranteed coverage for the rest of your life. It comes with higher premiums because of that guarantee. However, it also provides the benefit to your estate and your loved ones without picking a death date, as you essentially do with term coverage.
Additionally, whole or permanent coverage allows the policyholder to borrow from the policy, as it builds cash value over time. [Keep in mind: If tax-free loans are taken and the policy lapses, a taxable event may occur. Loans and withdrawals from life insurance policies that are classified as modified endowment contracts may be subject to tax at the time that the loan or withdrawal is taken and, if taken prior to age 59½, a 10 percent federal tax penalty may apply. Withdrawals and loans reduce the death benefit and cash surrender value. Guarantees subject to the claims paying ability of the underlying issuer.]
Life Insurance Myths
Life insurance can be confusing, I know. We see many people who forgo coverage simply because they don’t take the time to understand the process and options that are available. Many people also think life insurance is too expensive. Statistics show that most people believe coverage costs about twice what it actually does.
If you have questions about life insurance, need to apply for coverage, or would like to sit down with our team and review any current policies you have, please, don’t hesitate to pick up the phone. A 10 or 15 minute consultation could mean peace of mind for your family.
Article by Alex Roig, Senior Partner and Wealth Advisor at Family Financial Partners — a financial services firm in Lexington, Kentucky.