FAQs

General

  • In simple terms, life insurance is a contract between you (the policyholder) and an insurance company. You pay regular premiums to the insurer, and in exchange, the insurer promises to pay a death benefit to your designated beneficiaries upon your passing.

    This death benefit is a lump sum of money that can be used by your loved ones to cover various expenses, such as:

    • Daily living costs

    • Funeral expenses

    • Outstanding debts (mortgage, loans, etc.)

    • Children's education

    • Estate taxes

    The amount of the death benefit and the premium you pay depend on several factors, including your age, health, lifestyle, and the type and amount of coverage you choose.

    In addition to a death benefit, there are certain types of policies that also include LIVING benefits.

  • Life insurance provides a financial safety net for your loved ones if you pass away. While not everyone needs life insurance, it's generally recommended for individuals who have people financially dependent on them, such as:

    • Parents with young children: Life insurance can help ensure your children are cared for financially if you're no longer there to provide for them. Imagine a young couple with a new mortgage and a baby on the way. Life insurance could provide the surviving spouse with the financial means to pay off the mortgage, cover childcare costs, and maintain their standard of living.

    • Spouses or partners: If your partner relies on your income, life insurance can help them maintain their lifestyle after your passing. For example, if one spouse is a stay-at-home parent, life insurance on the working spouse could replace the lost income and allow the surviving spouse to continue caring for the children without financial strain.

    • Homeowners: A life insurance payout can help your family pay off the mortgage and avoid losing their home.

    • Those with co-signed debt: If you have co-signed loans, your death could leave your co-signer responsible for the debt. Life insurance can help cover these costs.

    • Small business owners: Life insurance can help your business partners or heirs cover expenses and ensure the continuity of your business. For instance, a business owner with a key employee could use life insurance to fund the recruitment and training of a replacement, minimizing disruption to the business.

    • Individuals with special needs dependents: Life insurance can provide long-term financial support for your dependents.

  • To determine how much life insurance you need, it's essential to assess your financial situation and consider the following factors:

    • Income replacement: Estimate how many years of your income your family would need to replace. This could include covering daily expenses, mortgage payments, and future costs like college tuition.

    • Debts: Calculate the total amount of outstanding debts you have, including your mortgage, loans, and credit card balances.

    • Dependents: Consider the number of dependents you have and their financial needs, including children, elderly parents, or disabled family members.

    Future expenses: Factor in future costs like your children's education or your funeral expenses.

    Once you have a clear understanding of your financial needs, you can use a life insurance calculator determine an estimated coverage amount needed.

  • The best policy for you depends on your individual needs and circumstances. Consider your budget, financial goals, and the needs of your beneficiaries. I can help you navigate the options and find the right fit.

  • Several factors can influence the premium you pay for life insurance:

    • Age: Premiums generally increase with age, as the risk of death increases.

    • Health: Your overall health and medical history play a significant role in premium calculations. Individuals with pre-existing conditions or a history of serious illness may pay higher premiums.

    • Lifestyle: Lifestyle factors, such as smoking or engaging in risky activities, can also affect premiums.

    • Coverage amount: The higher the death benefit, the higher the premium.

    Policy type: Permanent life insurance typically has higher premiums than term life insurance due to its lifelong coverage and cash value component.

  • Depending on the policy, you may be able to renew it, convert it to a permanent policy, or let it expire. Renewal rates are usually higher than the original premium.

  • As a parent, your child's well-being is your top priority. While the thought of a child needing life insurance can be difficult, there are several compelling reasons why it's worth considering.

    Here's a breakdown of the key benefits:

    • Guaranteed Insurability:

      • One of the most significant advantages is locking in insurability. If your child develops health issues later in life, obtaining affordable life insurance could become challenging or impossible. A policy purchased now guarantees they'll have coverage regardless of future health.

    • Financial Protection (in the Unthinkable):

      • While no parent wants to imagine it, life insurance can help cover funeral expenses and other related costs in the devastating event of a child's passing. This allows families to focus on grieving without added financial burdens.

    • Building Cash Value

      • Many child life insurance policies, particularly whole life, accumulate cash value over time. This cash value can be accessed later for various needs, such as college expenses, a down payment on a first home, or even to supplement retirement income.

    • Long-Term Investment:

      • A child’s whole life policy can be seen as a long term investment. The cash value grows over time, and the policy can be transferred to the child when they reach adulthood, giving them a head start on their financial future.

    • Affordability:

      • Child life insurance policies are generally very affordable, often costing less than many everyday expenses. The younger your child is, the lower the premiums tend to be.

Living Benefits

  • "Living benefits" are provisions in a life insurance policy that allow the policyholder to access a portion of their death benefit while they are still alive, under specific qualifying circumstances.

    Essentially, they transform a traditional death benefit into a resource that can be used during the policyholder's lifetime.

    Key Aspects:

    • Riders:

      • Living benefits are typically added to a life insurance policy through "riders." These are optional add-ons that customize the policy.

    • Qualifying Events:

      • Common qualifying events that trigger living benefits include:

        • Terminal Illness: A diagnosis with a limited life expectancy.

        • Chronic Illness: A condition that prevents the policyholder from performing activities of daily living (ADLs).

        • Critical Illness: Diagnosis of a severe medical condition like a heart attack, stroke, or cancer.

    • Accessing the Benefits:

      • When a qualifying event occurs, the policyholder can access a portion of the death benefit to help cover expenses.

      • This payout will typically reduce the death benefit that beneficiaries receive.

    • Types of living benefits:

      • Terminal illness riders.

      • Chronic illness riders.

      • Critical illness riders.

      • Also the cash value growth inside of some permanent life insurance policies can be used as a living benefit.

    • Importance:

      • Living benefits can provide crucial financial support during difficult times, helping to pay for medical bills, long-term care, or other necessary expenses.

  • Cash value is a feature of most permanent life insurance policies. It grows tax-deferred over time and can be accessed through policy loans or withdrawals. It's separate from the death benefit.

  • The answer is no. Living benefits, or accelerated death benefits, provide access to a portion of your policy's death benefit during your lifetime if you experience a qualifying event. When you use these benefits, the amount you receive is deducted from the original death benefit. Think of it as accessing your future death benefit today. While this provides valuable financial support during difficult times, it does reduce the amount your beneficiaries will receive upon your passing. It's crucial to understand this trade-off when considering using living benefits.

  • Generally, if you accelerate your death benefit through living benefits due to a qualifying chronic, critical, or terminal illness, the proceeds are received income tax-free under Section 104(a)(3) of the Internal Revenue Code. However, it's crucial to consult with a qualified tax professional for personalized advice, as specific circumstances and policy details can affect tax implications.