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Spring 2018  Volume 11, Number 1        

long term care

Life Insurance: When Free isn’t Enough

Employer sponsored life insurance may not meet all your needs.

Many individuals get free or low-cost life insurance from their employers. In 2017 LIMRA, the life insurance industry’s research arm, estimated that 108 million Americans obtained life insurance through a group plan as compared to 102 million who purchased individual plans.

If you only have life insurance through your employer, you may think this is enough. A typical employer-sponsored policy offers a benefit of $25,000 to $50,000; a benefit equal to an employee’s annual salary; or a benefit that is a multiple of one to three times an employee’s salary.

Most likely you need more, much more. Unless you’re just out of college or have no debt or dependents, the amount of life insurance your employer offers probably isn’t going to be enough to cover your beneficiaries’ needs.

Many life insurance brokers recommend purchasing at least 10 times your annual salary and then adding more depending on your needs. At the very least, you should provide enough to pay off your debts. While a federal student loan is cancelled if the borrower dies, a private loan is not likely to be forgiven and will be left to your beneficiaries to pay. You’ll also need enough to pay off your mortgage. If you have children, you may want to provide them with enough money to cover their education after they graduate from high school. And, if you have people who are dependent on your income, you’ll need a policy that provides supplemental income.

Before you rush off and purchase more coverage, though, decide how much coverage you already have and what you and your beneficiaries will need in the future.

Employer-Sponsored Coverage

To accept the employer-sponsored coverage, usually all you have to do is name a beneficiary or beneficiaries.

Some employers will offer you the option to buy supplemental group life insurance up to three or four times your annual salary. If you’re young and healthy, this might not be the most cost effective option. It might be less expensive to purchase coverage on the open market. However, if you’re chronically ill, supplemental group life insurance might be your best choice because you might not have to go through a health screening to qualify.

Individual Term Life

A term life policy will cover you for a specified time. If you die while the policy is in effect, your beneficiaries will get the full amount.

Once the term is up, you can renew your coverage or let the policy expire. You cannot borrow from the policy or get a cash value amount.

Individual Permanent Life Insurance

A permanent life insurance policy pays benefits to your beneficiaries on your death. This type of policy stays in effect as long as you continue to pay your premiums, unlike a term life policy, which covers a specified period.

A permanent life insurance policy also accumulates cash value on a tax-deferred basis. An important feature of this is that you can take out a low-interest loan from the policy. If you don’t pay it back, your death benefit will be lower.

Please contact us to discuss how much life insurance you might need and which kind of insurance is best for you and your familiy’s situation.


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In this issue:

This Just In...

Watch for Health Insurance Premium Increases

Haven’t Saved Enough for Retirement? Here’s a Few Ideas

Life Insurance: When Free isn’t Enough

How Life Insurance Companies Get to the Truth


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