Understanding Why to Buy Life Insurance:
There are multiple reasons to purchase life insurance policies. The primary purpose for purchasing life insurance is to provide financial stability to beneficiaries in the event of the insured’s death. Beneficiaries are faced with a multitude of financial responsibilities after the death of the insured. Not only is the loss of an income devastating to a family, but any previous debts of the deceased such as credit cards, automobiles, even mortgages have to be paid in addition to funeral costs. Life insurance can help to balance the financial burden of the beneficiary by providing a consistent income or a lump sum of money.
Life insurance can also be purchased as a savings tool. Certain life insurance premiums actually include cash savings. More simply, if a “permanent” life insurance policy was purchased for a premium of $1,000 per year, a portion of that money would pay for the life insurance while the other portion would be invested. The invested portion (cash value) is tax-deferred enabling larger financial growth for the individual. These types of policies can be used as collateral when taking out a loan or even advanced savings for a child’s education.
Two kinds of life insurance
While there are many different kinds of policies available, there are really only 2 kinds of life insurance:
- Term - this is temporary protection without investment benefits; it lasts for a stated period of time (usually 5, 10, 15 or 20 years), and may expire at age 75, 80 or 100, depending on the policy. If you die when the policy is in force, the company pays the death benefit; if you die after it expires, there is no coverage, and no death benefit will be paid. Because it is simple protection, term premiums tend to be the lowest of the two kinds of insurance, but increase as you age.
- Permanent - as long as you pay the premiums, the coverage stays in effect, no matter what your age. These policies tend to offer less flexibility, but some offer financial benefits through the cash value of the policy. Premiums can be level for life (they don’t increase as you age, even if your health changes), or they can vary depending on the plan you choose. Premiums tend to be higher than term when you’re younger, but will be lower than term when you’re older and possibly uninsurable due to health.
Depending on what stage of life you’re in, your needs will be different, and your need for life insurance coverage will be different, too. At the very least, review your life insurance coverage with your advisor every 5 years. Make sure the policy you pay for will pay back when it’s needed most.
Understanding Beneficiaries
A beneficiary is defined as the person whom receives the pay out of a life insurance policy in the event of the insured’s death and is often times referred to as revocable or irrevocable. Revocable beneficiaries can be terminated from the policy at any time while irrevocable beneficiaries must give their authorization to be removed from the policy.
There are two different types of beneficiaries that need to be named on each life policy: primary and secondary. Primary beneficiaries are the first person to receive the benefits in the event of the insured’s death, while the secondary beneficiary would receive the death benefits in the event of both the insured and primary beneficiary’s death. If the insured and both primary and secondary beneficiaries were to die at the same time, the proceeds of the insurance policy would be paid to the insured’s estate.
Why Choose Group Life Insurance?
Life insurance is valued by many employees. By providing this type of benefit you will be addressing a very sensitive subject. This shows your employees that you care about their own and their family’s financial well-being. This sense of consideration to employees is a good way to attract and retain strong employees. Life insurance generates a sense of security and protection which can result in a more content workforce.
Without life insurance you are risk the financial wellbeing of loved ones. Help your employees apply risk management to your life by purchasing life insurance and protect your beneficiaries. To learn more or to discuss the implementation of a group life insurance policy please get in touch with us, we are here to guide you through the process.
