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If you own a life insurance policy and have had it for more than five years, you should have your policy reviewed. Over the past several years, life insurance companies have made changes to the costs of the policies, cost of insurance and guarantees within the policy that can either save you money in insurance premiums or provide more coverage for the same cost.
Know what type of insurance you need
The first step in reviewing your life insurance is to understand what type of insurance you need. If you aren’t maximizing the money in your IRA or 401(k) program at work, have a significant life insurance need and have that need for thirty years or less, then you might want to consider term insurance for your life insurance need.
Term insurance provides death benefit only. You pay premiums and your family would receive a benefit if you die. You can purchase significant amounts of life insurance for relatively little cost using term insurance. This is especially true if you are not only trying to protect your family from a premature death, but are saving for retirement and college education needs at the same time.
For those who are saving money in a regular savings or investment account outside of an IRA or a 401(k) and have a life insurance need; permanent or cash value insurance is appropriate. Not only do you receive the insurance protection using permanent insurance, but you have a component in your insurance for tax deferred savings.
Permanent life insurance policies have been given special tax status by the government. This means the cash values in a life insurance policy are allowed to accumulate with no current taxes due. Properly structured, a life insurance policy can provide excellent death benefit protection, deferred savings and tax free use in the future.
The Insurance Review
Reviewing term insurance is easy. Have your insurance agent get you current quotes on insurance for the term you want to hold. Term insurance can be purchased in one, five, ten, fifteen, twenty and thirty year increments. You will just need to compare the cost of this insurance coverage to the cost you presently pay. If the cost of the new coverage is less, then you should consider changing your policy.
Never surrender your present policy until your new policy is issued and put in place. The quote your insurance advisor provides may not be the actual offer the company will provide. You also want to insure the quality of the company you purchase the insurance from is high. Rating agencies such as AM Best regularly rate life insurance companies on their financial and claim paying strength.
With cash value policies (whole life, universal life, and variable universal life) you will want to have your advisor do a full review. A full review of a cash value policy consists of the following components:
• A review of your inforce policy to make sure it will continue providing coverage based on your present premium payments to 100 years old.
• A review of the projected cash values of the life insurance policy using the present dividend or interest crediting rates your company is paying.
• A review of the quality of the insurance company you’re with as it relates to their financial strength and claim paying ability.
• A comparison of your present policy to the newer policies that are available today to see if you are getting the best return you can as it relates to cash value buildup as well as guaranteed death benefits.
Your life insurance policy is a financial instrument. Most of us spend time every year reviewing the investments that we hold with mutual funds, real estate, stocks and bonds. For some reason when it comes to life insurance, we just put our policies in a drawer and never look at them again.
It’s important that you review your life insurance just like any other financial instrument you own. We at the Patrick Group have a great program for reviewing and comparing life insurance policies. We would be happy to spend time with you explaining how a review would work in your particular situation.
If you would like more information or support from one of our associates, please visit us online or e-mail us and your Stage 2 Associate will get back to you with more information.
With Warm Regards,
Stage 2 Planning Partners
Stage 2 Planning Partners © 2006
Securities and Investment Advisory Services are offered through Representatives of NFP Securities, Inc. a Broker/Dealer, Member NASD/SIPC and Federally Registered Investment Advisor 1250 Capital of Texas Highway, Bldg. 2 Suite 125 Austin, TX 78746 - 512-697-6000 Representatives listed on this website are currently registered to conduct securities business in the following states: AZ, CO, CT, FL, IL, IN, MA, MT, NC, NH, NY, PA, RI, VA, VT, WA Stage 2 Planning Partners is an affiliate of National Financial Partners Corp., the parent company of NFP Securities, Inc.
NFP Securities is not affiliated with Harris- Murray
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