Term life insurance, whole life insurance, universal life insurance, variable life insurance, survivorship insurance… the list and combinations seem endless. Do you know which life insurance policy type is right for you? At Frye-Shaffer Insurance we can help. Our dedicated team of life insurance professionals understand markets and regulations and can find the right plan – or mixture of plans – for your specific needs.
Term Life Insurance Basics:
- Coverage for a “term” or period of your life
- Lower premiums for a higher coverage
- Rates can change after specific terms expire.
- No equity – cannot be used as cash value
Permanent Life Insurance Basics:
- Exactly like it says – permanent, not for a specific period
- Protection carries with you your whole life
- Can build equity and have cash value
- Higher premiums then term life, but can be more valuable in the long run
Term and Life Together:
- Build lifelong base of whole life coverage
- Supplement specific times of your life with term insurance
When to choose term?
Most people choosing term life have a strategy for long term net worth and need specific coverage for a period of their lives to protect debt, loved ones, and children. For a homeowner with children it might make sense to have a term life policy to cover the mortgage and living needs until their children are old enough to provide for themselves – in this case the term would expire around the time your children move out.
When to choose whole life?
Whole life can be used in the retirement years as cash assets. It can provide equity for loans and have fixed payments that do not increase with time. Many times whole life policies will pay dividends – although not always.
With so many options many people find themselves overwhelmed when they receive life insurance quotes. Let one our life insurance professionals put together the right life insurance quote for you.
Life Insurance FAQs
Q: How much life insurance should an individual own?
A: Rule of thumb suggests an amount of life insurance equal to 6-8 times annual earnings. However, many factors should be taken into account when determining the right amount of life insurance for you and your family.
Important factors include:
- Income sources (and amounts) other than salary/earnings
- Whether or not you are married and, if so, what your spouse’s earning capacity is
- The number of individuals who are financially dependent upon you
- The amount of death benefits payable from Social Security and from an employer-sponsored life insurance plan
- Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need, etc.)
Calculating the correct amount of life insurance to buy is not as simple as it appears. We recommend contacting us for help determining the right amount of coverage. As independent agents, we are unbiased advisors that will help you avoid buying too much, show you appropriate optional coverage for your need, and recommend a company that will best serve your interests.
Q: What about purchasing life insurance on a spouse and on children?
A: In certain circumstances, it may be advisable to purchase life insurance on children; generally, however, such purchases should not be made in lieu of purchasing appropriate amounts of life insurance on the family breadwinner(s).
It is of utmost importance that the income-earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance. This should be done before contemplating the purchase of life insurance on children or on a non-wage-earning spouse. Life insurance on a non-wage-earning spouse is often recommended for the purpose of paying for household services lost due to this individual’s death. In a dual-earning household, it is important to protect the income earning capacity of both spouses.
Q: Should term insurance or cash value life insurance be purchased?
A: This is a difficult question that can only be answered depending on your personal circumstances.
First, recognize that in any life insurance purchasing decision, two questions must be answered:
- How much life insurance should I buy?
- What type of life insurance policy should I buy?
If you are on a tight budget, you may opt for term life insurance- which tends to be the least expensive life insurance option you can choose.
If your ability to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, it is then appropriate to consider the second question: what type of policy to buy. Important factors affecting this decision include your income tax bracket, whether the need for life insurance is short-term or long-term (e.g., 20 years or longer), and the rate of return on alternative investments possessing similar risk.
Q: How does mortgage protection term insurance differ from other types of term life insurance?
A: The face amount under mortgage protection term insurance decreases over time, consistent with the projected annual decreases in the outstanding balance of a mortgage loan. Mortgage protection policies are generally available to cover a range of mortgage repayment periods, e.g., 15, 20, 25, or 30 years. Although the face amount decreases over time, the premium usually remains the same. Further, the premium payment period often is shorter than the maximum period of insurance coverage. For example, a 20-year mortgage protection policy might require that level premiums be paid over the first 17 years.
Q: Can an existing life insurance policy be used to provide for the repayment of an outstanding mortgage loan?
A: Yes. An existing policy, either term or cash-value life insurance, can be used for many purposes, including paying off an outstanding mortgage loan balance in the event of the insured’s death. Although a lender may offer a mortgage protection term policy to you, the lender rarely requires it.
Credit life insurance is frequently recommended in conjunction with the taking out of an installment loan when purchasing expensive appliances or a new car, or for debt consolidation. Is credit life insurance a good buy?
Credit life insurance is frequently more expensive than traditional term life insurance. Further, if you already own a sufficient amount of life insurance to cover your financial needs, including debt repayment, the purchase of credit life insurance is normally not advisable due to its relatively high cost.