Robert Hunt Agency

Helping you Plan for the Future
Home
About Us
Companies We Represent
Contact Us
Annuities
Cancer
Dental
Group Health Insurance
Individual Health
Life Insurance
Long Term Care
Medicare Supplements
Medicare Part D Coverage
Life Insurance

You may ask yourself "Do I need and can I afford Life Insurance?"  Everything seems more expensive lately including housing, utilities, day-to-day expenses and of course those expenses nobody likes to think about such as funeral and burial costs.  How do you ensure your loved ones are taken care of after you are gone?  Here are some reasons to consider Life Insurance.

  • Replace Income for Dependents
  1. If people depend on your income, life insurance can replace that income for them if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Insurance to replace your income can be especially useful if the government- or employer-sponsored benefits of your surviving spouse or domestic partner will be reduced after your death.
  • Pay Final Expenses
  1. Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
  • Create an Inheritance for your Heirs
  1. Even if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
  • Pay Federal "death" Taxes and State "death" Taxes
  1. Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the Federal "death" tax rules between now and January 1, 2011 will likely lessen the impact of this tax on some people, but some states are offsetting those federal decreases with increases in their State-Level "death" taxes.
  • Make significant Charitable Contributions
  1. By making a charity the beneficiary of your life insurance, you can make a much larger contribution than if you donated the cash equivalent of the policy's premiums.   
  •     Create a Source of Savings
  1. Some types of Life Insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner's request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of "forced" savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim).

Just remember, you don't buy life insurance for yourself, you buy it to help the loved ones you leave behind.


 What are the principal types of Life Insurance?

There are two major types of Life Insurance "term" and "whole life". Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were "term" and about 7.1 million were "whole" life.

Term Life:

Term Life Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.

There are two basic types of Term Life insurance polices, "level term" and "decreasing term".
  • Level Term means that the death benefit stays the same throughout the duration of the policy.
  • Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy's term.


Whole Life/Permanent Life:

Whole life or permanent insurance pays a death benefit whenever you die, even if you live to 100! There are three major types of Whole Life or Permanent Life Insurance: "traditional whole life", "universal life", and "variable universal life", and there are variations within each type.
In the case of Traditional Whole Life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So the company keeps the premium level by charging a premium that, in the early years, is higher than what's needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.

By law, when these "overpayments" reach a certain amount, they must be available to the policyholder as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.

In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product, Universal Life insurance and Variable Life insurance.

Universal or Adjustable Life:

This type of policy offers you more flexibility than whole life insurance. You may be able to increase the death benefit, if you pass a medical examination. The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in your account, you will also have the option of altering your premium payments, providing there is enough money in your account to cover the costs. This can be a useful feature if your economic situation has suddenly changed. However, you would need to keep in mind that if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage will end. You should check with your agent before deciding not to make premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.

Variable Life:

This policy combines death protection with a savings account that you can invest in stocks, bonds and money market mutual funds. The value of your policy may grow quickly, but you also have more risk. If your investments do not perform well, your cash value and death benefit may decrease. Some policies, however, guarantee that your death benefit will not fall below a minimum level.

Variable-Universal Life:

If you purchase this type of policy, you get the features of variable and universal policies. You have the investment risks and rewards characteristics of variable life insurance, coupled with the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.