Thinking about purchasing life insurance? That could be a smart decision, especially if you have a spouse, children or other dependents who rely on you for financial support. If you pass away, those loved ones may find themselves struggling with a lack of income, debt and other financial challenges. Of course, there are other reasons for purchasing life insurance. Perhaps you recently took out a loan to buy a home, business or other significant asset. You may need life insurance to pay off the balance if you pass away. Or maybe you’re in a business partnership and need life insurance to fund a buy-sell agreement. Perhaps you want to use life insurance to leave a tax-free legacy to your loved ones. No matter your motivation, it’s important that you take time to find the policy that’s right for your needs and objectives. You also may want to examine each policy’s available riders. These are options that provide additional benefits, sometimes at extra cost. In the right circumstances, these riders can address a critical need. Below are a few of the most common life insurance riders and how they may benefit you: Waiver of Premium This is a common rider that many insurers include in the base coverage. It waives your premium if you become disabled and are physically unable to work. It helps you maintain your life insurance protection even if you can’t pay the premium. Don’t think disability is likely? You may want to think again. The Council for Disability Awareness estimates that 25 percent of today’s adults will suffer a long-term disability that prevents them from working at some point in their career.1 While disability may not be probable, it is certainly possible. Disability Income Many life insurance policies offer disability protection above and beyond a simple waiver of premium. In fact, some offer disability income replacement. This rider provides monthly income if you suffer a long-term disability that prevents you from working. This type of rider usually increases your premium because it’s essentially an additional form of insurance. However, it may make sense if you don’t have group disability insurance through your employer, or if you don’t have an individual disability policy. Guaranteed Insurability Buying insurance when you’re young and relatively healthy? You may want to consider this rider. It allows you to buy additional insurance in the future without having to go through underwriting. That could be invaluable if you have an increased need in the future but your health has declined. Even if you’ve been diagnosed with cancer or suffered a heart attack, you have the option to increase your coverage with this rider. Accelerated Death Benefit This is another rider that’s fairly common and is often included in the base policy. The accelerated death benefit rider advances a portion of your death benefit in the event that you are diagnosed with a terminal illness and short life expectancy. Each insurer has its own rules about what qualifies as a short life expectancy. You can use the funds to pay medical bills, living expenses, debt or more. Your policy will state the maximum amount you can take as an accelerated benefit. However, this could be a valuable benefit to help you and your family during a difficult period. Return of Premium This rider is offered on term policies and is attractive to those who are worried about losing their premium payments. Clearly, outliving your term policy is always a good thing. However, you may not feel good about paying for years of insurance and not having anything to show for it at the end of the term. That’s often the case with term insurance, as those policies usually don’t accumulate cash value. As the name suggests, this rider returns a portion of your premiums if you outlive your term policy. The rider will likely increase your premium amount, however, so be sure to do a careful cost analysis to determine whether it’s worthwhile. Ready to plan your life insurance protection strategy? Let’s talk about it. Contact us today at DSM Financial. We can help you analyze your needs and choose the policy that’s right for you. Let’s connect soon and start the conversation. 1http://disabilitycanhappen.org/disability-statistic/ Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 17964 – 2018/9/4
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Are you thinking about buying life insurance for the first time? That could be a smart move. While no one likes to think about dying, it’s a risk that everyone must face at some point. If you’re relatively young and healthy, your death may be unlikely. However, people do pass away unexpectedly, and your passing may leave your family in a difficult financial situation. Life insurance minimizes the financial risk associated with death. Your life insurance policy will provide a tax-free lump-sum death benefit to your designated beneficiaries. They can then use those funds to overcome financial challenges such as debt, loss of income, education expenses or any other purpose. If you’ve never purchased life insurance before, you may be overwhelmed by the options. It’s difficult to know which type of policy is right for you or how much coverage you need. Below are three common questions many people have during the purchasing process. Your financial professional can also help you find the right protection for your needs. How much coverage should you buy? This is the major dilemma many people face with regard to life insurance. Clearly, you want enough coverage to protect your spouse, children or other loved ones after your death. However, you also don’t want to overpay for too much coverage. What’s the answer? The best approach is a needs-based analysis. This involves an evaluation of the specific costs your family may face after you pass away. For example, would they need to replace your lost income? Would they need money to pay off the mortgage or other debts? Perhaps you’d like to leave enough to help your children pay for college or your spouse to fund retirement. In a needs-based analysis, you and your financial professional examine your specific objectives and then determine the appropriate amount of coverage. Which type of policy is right for you? Not all life insurance is the same. Policies fall into one of two broad categories: term and permanent. Term insurance provides protection for a limited period of time, like 10 or 20 years. It’s a cost-effective tool if you need insurance while you have young children in the home or while you’re paying down a mortgage. Permanent insurance provides coverage for life, assuming you meet all premium requirements. Permanent policies also have cash value that accumulates on a tax-deferred basis. You may be able to use that cash value at some point as an emergency reserve or supplemental income. There are many different types of permanent policies available There’s no easy answer as to which type of policy is right for you. If you’re budget-conscious, you may want to consider a term policy. If you have a permanent, ongoing need for protection, a permanent policy may be a more appropriate fit. However, the only real way to answer the question is to consult with a financial professional and analyze your goals. Whom should you name as your beneficiaries? Your beneficiary is the person who will receive your death benefit after you pass away. It’s actually possible to have multiple beneficiaries, which may be appropriate if you want to split the benefit among children or some other group of people. Be careful leaving your death benefit to minor children, though. Some life insurance companies won’t make a payment to minors. Instead, the court may appoint someone to manage the money on their behalf, and that person may not share your goals or wishes. Instead, consider setting up a trust on behalf of your children and specifying your wishes in the trust document. You can leave the life insurance to the trust instead of directly to your kids. Finally, remember to check your beneficiaries regularly. If your life changes, you also may wish to change one or more of your beneficiaries. For example, people sometimes get divorced and forget to update their beneficiary. When they pass away, the ex-spouse still gets the benefit, even if that’s not what the deceased intended. Ready to find the right coverage for your needs? Let’s talk about it. Contact us today at DSM Financial. We can help you analyze your goals and develop a plan. Let’s connect soon and start the conversation. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 17965 – 2018/9/4 Are you thinking about the kind of legacy you will leave for your loved ones after you pass away? Your estate plan should prioritize your objectives and offer a strategy. It should also identify risks and challenges, such as taxes, end-of-life costs and even probate expenses.
One risk you may want to consider is debt. Many retirees try to minimize debt before they end their careers. However, that’s not always possible. Unexpected costs always arise, even in retirement. You could have credit card debt, mortgages, medical bills and more. It’s possible that your debt could impact the amount of assets that are distributed to your heirs. When you pass away, many of your assets will likely pass through a process called probate. That’s the legal process for settling an estate, and it often includes tasks like notifying heirs, liquidating assets and distributing inheritances. |
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