| Life insurance
is something that protects your loved
ones financially should something happen to you
unexpectedly, but it is also something that is largely
ignored by the American public.
Be it lack of caring, ignorance about the subject, or
just plain indifference; many seemingly responsible
people have a hard time discussing life insurance.
But the insurance industry is making it easier for consumers
to take out policies by lowering premiums and offering
flexible plans, giving people no excuse not to enact
a policy.
A November 2, 2006 column by Michelle Singletary of
The Washington Post, “Life
Insurance 101,” gives some information on
term life insurance as well as excerpts from an interview
she did with author Kimberly Lankford.
She starts out by explaining that term
life insurance is, because many people get confused
of the difference between term life insurance and whole,
or permanent life insurance. “Term life insurance
is not unlike buying insurance to protect your home
or car. Like those two products, you buy term life insurance
for a specified period of time. Under term insurance,
when the policy runs out, you typically get nothing
back.”
Critics of this type of life insurance say that people
are wasting their money, since they do not have any
access to the cash they are paying like they do in a
whole life insurance policy.
But a new term life insurance product has been developed
that is changing the way people view term.
“I say typically because there's a new version
of term life insurance that's a lower-cost alternative
to permanent insurance. A "return-of-premium"
policy will give you back all the money you paid to
cover yourself under a term life insurance policy --
provided you are still alive when the policy's term
is up.”
“As Lankford points out in ‘The Insurance
Maze,’ your annual premiums under a return-of-premium
policy will be higher, but you get a lump sum after
20 or 30 years. For example, a 41-year-old man could
pay about $405 for a regular-term policy with a $500,000
death benefit. If that same man bought a return-of-premium
policy, he could expect to pay about $1,330 a year,
all of which he would get back at the end of the term.
That's $26,600 over 20 years tax-free because you're
getting back your premiums.”
Lankford acknowledges the fact that this type of policy
can be a great option for people who don’t like
paying premiums and getting nothing in return at the
end.
Whether you decide to go with a term life insurance
policy or a whole is up to you to decide, but you should
also make sure you have an adequate amount of coverage.
There is no sense in taking out a policy only to not
have enough coverage for your loved ones.
“I generally recommend buying eight to 10 times
your income. But that's just a general rule of thumb.
If you're the sole income earner supporting a family
with several young kids and a big mortgage, you'll generally
need more insurance than someone who earns the same
salary but has a spouse who also works, older kids,
have already saved a lot of money for college, and have
a smaller mortgage. And stay-at-home parents need life
insurance, too, even though they don't earn an income,
because it would be very expensive to replace their
child care and everything else they do for the family.”
Talk to a life agent at LEI
Financial to find out which type of policy and coverage
amount is right for you and your family’s needs.
Back to Articles
|
