FAMILY SECURITY

Whew. taxes are done, youmight even be getting a littlemoney back. What a perfect time to sit down with a cup of coffee to review your insurance situation.

Fewer American adults own life insurance today than in 2004. Only 61% of men and 57% of women have some sort of life insurance coverage yet life insurance should be part of the foundation of your family's financial security. According to LIMRA, more U.S. adults are relying on employer-sponsored life insurance. The problem is when you leave the organization, your life insurance doesn't come with you.

Most planners recommend that you maximize whatever your employer offers as well as have an individual policy that will carry you through retirement. Some employers only offer a $10,000$20,000 policy which basically covers funeral expenses so themajority of the insurance will have to fall on the individual. You should have between 8 to 10 times your annual salary in life insurance. For instance, if you make $50,000 per year, you should carry $500,000 worth of life insurance to protect your family if you're gone. That goes for your spouse as well. If you are dependent on 2 incomes, you'll need to protect both of you.

There are several types of life insurance so choose the type of policy that makes the most sense for you.

Term Insurance:

Term Insurance is one that lasts for a specified period of time such as 10, 20, or 30 years. These are usually less expensive with premiums that remain locked for the defined period of time but if youwant the policy to continue after that period of time, the premium sky-rockets. So if you don't die before the policy times out, your rate will jump drastically. Many term policies are convertible to permanent ones without evidence of good health but do it as early as possible to keep the premiums down.

Permanent Insurance:

Traditional Whole Life policies offer the most guarantees. The monthly premium is guaranteed, and there is a guaranteed cash value and death benefit. Most whole life policies will last until the client is age 100 (for older policies) or 121 (for newer policies) so you probably won't outlive the insurance policy. They also can roll the annual dividends into the policy to increase the death benefit and/or cash value of the policy.

Universal Life is more flexible than traditional whole life because premiums can vary from year to year. It has maximum guaranteed premiums and minimum guaranteed cash values and death benefits. Instead of dividends, universal life policies earn interest at the credited interest rate determined every year. But if you underfunded the plan early, the insurance company may want additional monies later to maintain the same coverage. Newer policies are called Guaranteed Universal Life policies that as long as you paid a fixed premium every month without a late payment, they will guarantee the policy to age 120.

There are plans that combine a permanent policy with a term policy. You can purchase a smaller Whole Life policy along with a term rider. Let's say that you want a $200,000 whole life policy that will last until age 121 along with a $200,000 term rider that will last 20 years. Those are nice policies that will help a consumer get through the house payment years, then the permanent plan can carry you into retirement.

Just as your homeowners insurance won't pay a claim if you didn't have the policy prior to the hail damage, life insurance companies won't approve unhealthy applicants. Clients controlling their cholesterol or blood pressure with medication probably won't have trouble finding a policy but if the doctor is recommending an upcoming surgery, you'll have to complete the surgery before applying for the coverage. The younger you are when you apply, the less expensive the policy but don't think you're too old. I had one 60-year old client that purchased a $250,000 20-year term policy for $150 per month so it may be less expensive than you think. There is truly a need for life insurance. Let's look at Jim and Mary Anne's situation.

Jim had a $150,000 life insurance policy through his work and an individual $250,000 Whole Life policy at home. When Jim retired 5 years ago, his $150,000 policy at work went away. He and his wife, Mary Anne, depended on their monthly Social Security checks-his at $2000 and hers at $900 as well as his pension check of $1400 for a comfortable retirement income of $4300 per month.

Unfortunately, Jim had a heart attack last year at age 70 and passed away. Now Mary Anne was going to receive only one Social Security check as Social Security lets the surviving spouse chose which check will continue. Of course, most people chose the higher amount. Consequently, Mary Anne was able to continue receiving $2000 permonth from Social Security. But Jim's pension was set up to go away at his passing so that $1400 per month was gone.

Thank goodness for Jim's forethought in purchasing that $250,000 life insurance policy. Mary Anne received a check within 30-45 days that was income taxfree and took it to their insurance agent who suggested a single premium annuity to start paying her a monthly income of $1800 per month for life. That, combined with Jim's Social Security check, produced a lifetime income of $3800 per month whichwas still reasonably comfortable for Mary Ann. That's much different than if Jim didn't have any life insurance and her incomewas reduced to $2000 permonth.

The simple question is, would someone who depends on you suffer financially if you were to die tomorrow? If the answer is "yes", then you need life insurance.

If you have questions or want to visit about your life insurance needs or want a quote, please call Rebecca Nordquist at Phares Financial Services at 308-532-3180 or email me at [email protected]. I'll be happy to visit with you.