Here’s a topic that can go a lot of different directions. We’ll try to keep the discussion basic, so the goal is to give a brief overview of options available to consumers and discuss why you need coverage. As always, everyone’s situation is a little different so please discuss these options with a trusted advisor or expert.
What types of life insurance are available?
Essentially, there are two basic categories to consider: Term and Permanent.
- Term insurance is a product designed to be in force for a set number of years. If the insured is still alive at the end of the term period, the initial policy is ended. At that time, the policy can possibly be renewed, often with little to no underwriting through the same company. However, the premium can increase dramatically at this time or coverage can completely cease leaving an insured in need of exploring other alternatives if they are available. Premiums on these term policies do not accumulate any investment value, but a popular rider called a Return of Premium Rider can be purchased so some or all of the premiums paid are returned to the insured.
- Permanent coverage – that these policies can be structured several different ways with a number of rider options available. Generally, permanent coverage is designed so that the policy remains in force and will pay out benefits so long as the premiums are paid current to the time a claim is made.
A simple rule of thumb is that Term is designed to be temporary and Permanent is designed for a lifetime. Each serves numerous purposes, so make sure to consult with an expert to help determine which product(s) best fit your needs.
Typically, life insurance plans are individually owned or part of a group policy offered by an employer as part of a benefits package.
- Group plans are very affordable to the individual; however in most cases they are non-transferable and only remain in force while that individual or family member is with the employer.
- Individual plans can be purchased at any time regardless of employer offerings. While individually owned plans are not attached to the employer, they may be paid through payroll deduction. Individual policies don’t change if someone gets a new job, or moves to a new state, etc.
Both permanent and term may be options individually owned or offered through a group. Life insurance is unlike some other types of insurance because someone can own as many policies through as many insurance companies as they’d like and each will pay out the benefits at claim time so long as the policy is in force.
Why does someone need life insurance?
Life insurance isn’t for the insured; it is there to protect their loved ones by helping fill the financial void left when the insured is gone. When someone passes away, not only do they leave, but so does their income, benefits from work, help around the house, support raising the kids, etc. Folks have to imagine what life would look like if their spouse, significant other, or child were gone tomorrow.
Life insurance benefits are designed to help loved ones continue on with their life as normal as possible without sizable financial burdens left behind. By having a plan in place, the insured can help their loved ones pay off the mortgage or any other outstanding debt, replace their own income to help offset the shock of income loss, or even provide a means to pay for children’s college tuition. Life insurance plans can also be used to leave a lasting legacy by setting up a scholarship for future generations, endowments for non-profits, contributing to charities, etc. Not to mention the primary need to cover the unavoidable cost of a funeral and burial.
According to the National Funeral Directors Association, the average cost of a funeral is $8,343 and that is not including cemetery, monument or marker costs. If not planned for properly and death came unexpectedly, not only would the loss of a loved one be devastating, but an additional bill of ten to fifteen thousand dollars would be overwhelming.
Below you’ll find two articles with more information on life insurance.
For more information, contact Mike Wilken at (308) 646-0683.
Beacon Insurance 16 W 23rd St, Kearney, NE 68847
Read Mike’s post on the Medicare Age – What You Need to Know
Read Mike’s post on the Truth about Health Insurance