Life insurance asks a simple and yet vital question: is my family’s future planned well without me, or when I die? In other words, can my family manage financially on their own? Future planning takes into consideration the well-being of our loved ones. We cannot always plan or anticipate sudden changes, but we can have a plan in case something drastic occurs.

A life insurance policy is one critical component to manage future finances and fulfill potential family needs. A policy pays out cash to your loved ones after you die so that they can manage the immediate financial obligations of a funeral and continue their day to day lives uninterrupted.

There are several different types of life insurance policies, some of which provide benefits upon the policyholder’s death while other policies provide a return as the policyholder continues to live. In essence, life insurance provides a security blanket throughout one’s lifespan. It is never too early or late to consider and start planning for your future.

Alternate TextWho needs life insurance and why?

No individual or situation is alike and thus unique needs and requirements exist. Any individual that has someone dependent on them financially should consider life insurance for several reasons such as:

  • • Protecting future generation from your debt and expenses,
  • • Providing your spouse and children with future financial cushion,
  • • Providing retirement support beyond a retirement plan or social security income,
  • • To support medical expenses, burial costs and estate taxes.

Alternate TextWhat options are available?

There are policies that provide lifetime coverage and some that provide coverage for a few years. Policies can be customized to fit the individual needs. There are two main coverage types: term and whole.

Term insurance covers an individual for a specified time period. The benefits of the policy are only paid out if the policyholder passes away during the insurance term period. There are various premium guarantees and the general rule is the longer the guarantee, the higher the initial premium. This type of policy does not build up cash value for future use and primarily serves as a death benefit. Some different term policies are listed below:

  • • Convertible Term – allows to exchange for a permanent plan policy during the conversion period.
  • • Level or Decreasing Term – face amount decreases while premiums stay the same over time.
  • • Renewable Term – gives a renewal right when the term ends.

Whole Life (or Permanent insurance) is designed to provide financial protection and coverage over the entire lifetime. Some policies require premium payments for a set number of years and others require premium payments through the policyholder’s lifetime. The premium exceeds the actual cost of protection in the early years and this extra premium builds a cash value reserve. The cash value serves as a saving element which can be accessed by the policyholder during the lifetime. The cash value is also tax deferred unless the policyholder makes an early withdrawal. Some common whole life policies include:

  • • Indeterminate Premium – provides for adjustable premiums.
  • • Limited Payment – allows paying premiums for a limited time with lifetime protection.
  • • Non-participating – gives a level premium and face amount, but pays no dividends.
  • • Participating – pays dividends but they are not guaranteed.
  • • Single Premium – limited payment life with a large premium payment. Investment-oriented product.

Alternate TextHow much coverage is needed?

Insurance experts estimate various coverage amounts that can range from five to eight times your current income. There are several worksheets and online calculators available to help you identify relevant costs and other items required in the future. The simplest way to start is to determine how much you earn now and will earn until retirement. This figure will give you an idea of your financial needs and situation throughout the lifetime.

Alternate TextAdvantages and Benefits of Cash Value
  • Tax Benefit – provides tax-free cash value from a permanent life insurance to the named beneficiary(s).
  • Loans or withdrawals – the permanent life insurance cash value can be utilized to help with unexpected financial needs.

Alternate TextWhy should I contact an agent?

There are many factors and options to consider when shopping for life insurance and the process can become confusing and overwhelming. Arora Insurance Agency has a process that will allow you to understand your situation and tailor a solution to meet those needs. We offer a free, no-obligation consultation to eliminate the time constraints and other pressures that go into making the best possible decision for you and your family. Please don’t hesitate to contact us regarding any questions about your current policy or if you are seeking information regarding a new policy.

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