Let Insurance For Texans show you how to protect your family, even if you're not around!
Have you found the PERFECT family, home, car, and career? Want to make sure your family doesn't lose it all if something happens?
- Did you know that the average American household is in Debt over $100,000?
- What happens to that debt if you're not here to pay it off?
- Life Insurance via employers is generally more expensive and not convertible if you leave.
- Have you ever wondered what happens to your life insurance premiums if you simply out live the policy?
- Do you know you need life insurance but not sure where to start?
Insurance for Texans works with a matrix of companies that offer Life Insurance. We work with many so that you can obtain the correct policy for your needs while also securing it at a great price for you and your family.
The best part of all is that you can even kick the tires on how much it costs from your couch because we use technology to make your life simpler.
You can give us some quick info below to schedule a consultation, or read on below to learn about Life Insurance for Texans.
What Is Life Insurance?
At it's simplest, Life Insurance is a contract between an insurance company and an insured to provide a specified amount of money to a beneficiary if the named insured passes away. Insurance companies and financial advisers have done their best to complicate the contracts to make them more appealing, but that basic contract is at the core of all policies. And they all need for justification for that basic contract for them to exist.
So What Makes Life Insurance So Complicated?
First things first. We need to first establish that there are essentially two kinds of life insurance.
- Term Life Insurance is a policy that will cover you at a level premium for a defined number of years ranging from five to 30. If you out live the period of time, the policy can simply be discontinued or continued at a different schedule.
- Permanent Life Insurance is a policy that will cover you until the time of your passing so long as premiums remain paid. Permanent policies can have a lot of twists from a financial stand point that we will explore later.
The optional coverage options that can be attached to either of these two types of policies can make the topic of life insurance confusing to a customer. This is because it pollutes the idea of what is being bought. So let's break down these topics so that we can simplify the discussion.
Term Life Insurance
As we state above, Term Life Insurance is a contract to pay a beneficiary a sum of money known as a death benefit if the insured dies while the contract is in force. The word Term implies the that the contract is set to be in force for a specified time period. Those time periods range from five years to 30 years. What's not stated in many Term Life policies is that the name is typically short-hand for Level Term. That means that the price for the coverage will be the same over that specified time period list above. The other option is that the price will increase over time as you hit age bands. The vast majority of the policies that we put in place for people are Level Term.
What happens at the end of the "term" time period is always a question people have for us here at Insurance For Texans. Many of the companies we work with will give you the ability to extend the policy one year at a time. That can be incredibly useful if you simply need a bit more time to cover the need that life insurance provides for in death. That extension does come with caveats though.
The single year policy is done at attained age pricing which will always be more expensive than your level term price.
One a positive note, you will not be subjected to underwriting again.
There is still no cash value obtained.
Term Life Insurance is the most cost effective coverage for large amounts. Due to it's shortened time horizon of coverage, the price will be lower. That makes it an effective tool for families with a large need and a tight budget. It has many uses, but at it's core it is the protection that families are looking for.
Permanent Life Insurance
Permanent Life Insurance is a contract that is put in place to pay for a specified amount of death benefit that does not have a time horizon other than to be in place when you die. Since it stays with you, there are many uses that can range from making sure final expenses are covered all the way up to wealth transfers in large estates. Permanent policies typically accrue cash value besides providing death benefit. As a result, they can also be leveraged to tax plays around retirement incomes mechanisms as well as those wealth transfers.
There are different kinds of permanent insurance. Let's look at some of them briefly.
Whole Life is one of the more widely known types of permanent life insurance. It was used for many decades as a mechanism to cover those final expenses while also accumulating cash value. As interest rates plummeted during the financial machinations of the early 2000's, they fell out of favor with many life insurance companies. This was due to the fact that the interest rates attached to the cash accumulation vehicle began to be outpaced by inflation which left a bad taste in the mouth of both insureds and the companies. However, whole life insurance policies are incredibly stable and predictable. For the risk averse that desires coverage to be in place and to have a certain expected behavior, whole life insurance is a great option.
Universal Life is a popular choice today for permanent life insurance. In many cases it has replaced traditional whole life because the cash accumulation vehicle can be tied to things other than just interest rates. The cash accumulation can be an interest rate drive tool, or it can be tied into either stock market indexes or even mutual fund pricing. This has made it an attractive tool for many wealth advisers to help their clients accumulate cash value that can be leveraged for many applications. Just know that a Universal policy can behave erratically. Since a portion of the premium paid will be applied to the cash value portion of the policy, if the cash value plus the premium paid is not enough money to cover the cost of the insurance you can end up with a policy that requires a large "catch-up payment" or one that could be destroyed completely. This circumstance is why it is imperative to work with an adviser who understands the products and you needs at an in-depth level.
Final Expense is a life insurance tool that is used to make sure that the expenses of wrapping up your life are covered and not left to your estate. This policy is typically guaranteed issue and will also accrue cash value. It is intended to stay in-force until you pass and the proceeds are passed along to your family to cover those expenses. It is common for this policy to pay a reduced amount for the first twelve to twenty-four months that is equal to the cash value of the policy. Once that two year time period is past, the policy will be paid out at the death benefit. The amount of insurance available on these policies is typically limited since any person can obtain coverage with very limited underwriting.
One of the benefits of permanent life insurance is that it can be put in place by a limited number of payment and kept in force long term due to the cash accumulation portion of the policy structure. This can be extremely helpful if you have a momentary or sudden of burst of cash that can be used to pay for the policy to be put in place for the long haul. It can also be very useful to use to put a policy place for a child who is very young. Securing that policy at that age can make a huge difference.
One other consideration on permanent life insurance policies is that they typically are more expensive than term life insurance policies. This is because a permanent policy is going to pay out while very few Term Life policies pay out. As a result, many folks on tight budgets see these policies as something that they can't afford today. This is also why taking advantage of the cash value for a policy on children can be such a huge advantage. They can have permanent policies in place and no one is required to pay for it long term.
- As has been stated above, life insurance is the ability for a beneficiary to receive money at the death of an insured. Financial people are always looking to make things more appealing to people who can purchase their products, and life insurance is no different. They have added in many things to make both Term and Permanent life insurance look more appealing to you. Some of them make complete sense for most anyone and some of them really are there for special cases. Let's take a look at a few of the options available.
- Living Benefits - This is a portion of the death benefit on a policy that can be used while you are still alive if you have been given a terminal diagnosis like cancer with a very short time frame to live. Think six months or less. This money can be used to spend that remaining time however you choose to do so. This is one optional coverage that most companies do not charge for, and we highly recommend to anyone considering life insurance.
- Return of Premium - This optional coverage is only used on Term Life Insurance. The purpose here is to return all of the premium you paid during your term policy period assuming you outlive the term. This is an option that many people find appealing, though the details have to evaluated closely. Since this option incurs extra cost on the policy, you have to understand if it makes sense for your budget and your family.
- Long Term Care - While this option can be placed on either a term or permanent policy, it is more often included on permanent life insurance policies. Similar to the Living Benefits option above, this will be either a portion or all of the potential death benefit associated with the policy. The Long Term Care provision differs from Living Benefits though, in that this money is used strictly to cover the costs associated with nursing homes, home health cares, or assisted living facilities. The insured must meet criteria around activities of daily living to access the dollars available under this coverage. This can be a great option for people considering Long Term Care Insurance who find it's costs to be too burdensome.
- These are the top three options that we discuss with families potentially looking at life insurance. The options extend well beyond these three and continue to make policies more complex AND more expensive. The bottom line is that every person can use the tool of life insurance to enhance their family's or estate's future. Many features such as Life Insurance Retirement Planning (LIRP) or Term Ladders are useful, but you need to have a grasp on the goal you are wanting to accomplish rather than a desire to access the latest trend or buzzword. The agents at Insurance For Texans want to work with you to craft a solution, not just sell you a product.
- If you would like to learn more about life insurance we would be happy to help you discover why you need life insurance, how much life insurance you need, or why life insurance is important. Ron believes in it greatly due to his Dad's very personal story. If you'd like to schedule a time to discuss that story and subsequent journey, click the blue button below to schedule a time to talk.