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Protecting Your Loved Ones with Life Insurance

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Protecting Your Loved Ones with Life Insurance

How much life insurance do you need?

Your life insurance needs will depend on a number of factors, including the size of your family, the nature of your financial obligations, your career stage, and your goals. For example, when you’re young, you may not have a great need for life insurance. However, as you take on more responsibilities and your family grow, your need for life insurance increases.

Here are some questions that can help you start thinking about the amount of life insurance you need:

    • What immediate financial expenses (e.g., debt repayment, funeral expenses) would your family face upon your death?
    • How much of your salary is devoted to current expenses and future needs?
    • How long would your dependents need support if you were to die tomorrow?
    • How much money would you want to leave for special situations upon your death, such as funding your children’s education, gifts to charities, or an inheritance for your children?
    • What other assets or insurance policies do you have?

Types of life insurance policies

The two basic types of life insurance are term life and permanent (cash value) life. Term policies provide life insurance protection for a specific period of time. If you die during the coverage period, your beneficiary receives the policy’s death benefit. If you live to the end of the term, the policy simply terminates, unless it automatically renews for a new period. Term policies are typically available for periods of 1 to 30 years and may, in some cases, be renewed until you reach age 95. With guaranteed level term insurance, a popular type, both the premium and the amount of coverage remain level for a specific period of time.

Permanent insurance policies offer protection for your entire life, regardless of your health, provided you pay the premium to keep the policy in force. As you pay your premiums, a portion of each payment is placed in the cash-value account. During the early years of the policy, the cash-value contribution is a large portion of each premium payment. As you get older, and the true cost of your insurance increases, the portion of your premium payment devoted to the cash value decreases. The cash value continues to grow–tax deferred–as long as the policy is in force. You can borrow against the cash value, but unpaid policy loans will reduce the death benefit that your beneficiary will receive. If you surrender the policy before you die (i.e., cancel your coverage), you’ll be entitled to receive the cash value, minus any loans and surrender charges.

Many different types of cash-value life insurance are available, including:

    • Whole life: You generally make level (equal) premium payments for life. The death benefit and cash value are predetermined and guaranteed (subject to the claims-paying ability and financial strength of the issuing insurance company). Your only action after purchase of the policy is to pay the fixed premium.
    • Universal life: You may pay premiums at any time, in any amount (subject to certain limits), as long as the policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value will grow at a declared interest rate, which may vary over time.
    • Indexed universal life: This is a form of universal life insurance with excess interest credited to cash values. But unlike universal life insurance, the amount of interest credited is tied to the performance of an equity index, such as the S&P 500.
    • Variable life: As with whole life, you pay a level premium for life. However, the death benefit and cash value fluctuate depending on the performance of investments in what are known as subaccounts. A subaccount is a pool of investor funds professionally managed to pursue a stated investment objective. You select the subaccounts in which the cash value should be invested.
    • Variable universal life: A combination of universal and variable life. You may pay premiums at any time, in any amount (subject to limits), as long as policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value and death benefit goes up or down based on the performance of investments in the subaccounts.

With so many types of life insurance available, you’re sure to find a policy that meets your needs and your budget.

Choosing and changing your beneficiaries

When you purchase life insurance, you must name a primary beneficiary to receive the proceeds of your insurance policy. Your beneficiary may be a person, corporation, or other legal entity. You may name multiple beneficiaries and specify what percentage of the net death benefit each is to receive. If you name your minor child as a beneficiary, you should also designate an adult as the child’s guardian in your will.

What type of insurance is right for you?

Before deciding whether to buy term or permanent life insurance, consider the policy cost and potential savings that may be available. Also keep in mind that your insurance needs will likely change as your family, job, health, and financial picture change, so you’ll want to build some flexibility into the decision-making process. In any case, here are some common reasons for buying life insurance and which type of insurance may best fit the need.

Mortgage or long-term debt: For most people, the home is one of the most valuable assets and also the source of the largest debt. An untimely death may remove a primary source of income used to pay the mortgage. Term insurance can replace the lost income by providing life insurance for the length of the mortgage. If you die before the mortgage is paid off, the term life insurance pays your beneficiary an amount sufficient to pay the outstanding mortgage balance owed.

Family protection: Your income not only pays for day-to-day expenses, but also provides a source for future costs such as college education expenses and retirement income. Term life insurance of 20 years or longer can take care of immediate cash needs as well as provide income for your survivor’s future needs. Another alternative is cash value life insurance, such as universal life or variable life insurance. The cash value accumulation of these policies can be used to fund future income needs for college or retirement, even if you don’t die.

Small business needs: Small business owners need life insurance to protect their business interest. As a business owner, you need to consider what happens to your business should you die unexpectedly. Life insurance can provide cash needed to buy a deceased partner’s or shareholder’s interest from his or her estate. Life insurance can also be used to compensate for the unexpected death of a key employee.

Review your coverage

Once you purchase a life insurance policy, make sure to periodically review your coverage; over time your needs will change. An insurance agent or financial professional can help you with your review.

Your life insurance needs will depend on a number of factors, including whether you’re married, the size of your family, the nature of your financial obligations, your career stage, and your goals. Life insurance is not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association.

A note about variable life and variable universal life insurance

Variable life and variable universal life insurance policies are offered by prospectus, which you can obtain from your financial professional or the insurance company. The prospectus contains detailed information about investment objectives, risks, charges, and expenses. You should read the prospectus and consider this information carefully before purchasing a variable life or variable universal life insurance policy.

IMPORTANT DISCLOSURES

This material was prepared by Broadridge Investor Communication Solutions, Inc. This information is believed to be from reliable sources; however, no representation is made as to its accuracy or completeness. This information does not constitute tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty, nor is it a solicitation or recommendation to purchase or sell any insurance or investment product or service, and readers should not rely upon it as such. Readers should seek such advice from their own tax or legal counsel or financial professional.

Why Car Insurance Costs are Climbing: Insights into Expensive Premiums

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car insurance

Summer is almost over, and many people still yearn for the open road after suffering through two years of a pandemic. In fact, drivers nationwide are shopping for a new car.

Full-year retail sales are forecast to increase from 11.7 million in 2022 to 12.4 million in 2023 according to Cox automotive sales. Cox chief economist Jonathan Smoke noted on the firm’s mid-year review that, “Consumers always find a way to buy new wheels despite the circumstances. Americans are not only car-dependent but have a love for cars.”

“Heading into the second half of the year, however, the market will likely see fewer upside surprises, Smoke added. “The market will still be limited by total available supply, but demand will also be limited by the level of prices and rates, which are not likely to come down enough to stimulate more demand than the market can bear.”

Outpacing Inflation

Prices are not the only determination for many buyers. There are other factors to consider. “Auto insurance costs were up about 15% in March from a year earlier, significantly higher than the latest reading on overall inflation of 5%. The average annual premium is about $2,000”, according to the personal finance website Bankrate, says Ann Carns of The New York Times.

Plus, car insurance prices are expected to continue rising. The chief executive of the insurer Progressive said in a shareholder letter that the company planned to be “aggressive with raising rates over the remainder of the year.” Allstate said it expected to pursue additional increases in 2023 “to improve auto insurance profitability,” Ms. Carns added.

Speak With Your Agent

Joseph D. Sanzo, senior insurance professional at Barnum Financial Group, states, “Claims are becoming much more expensive and drawn out. So even if you haven’t had any claims or don’t drive as much, you are still going to see your rates increase.”

Sanzo continues, “A perfect example would be to look at the cost of vehicles. A 2018 Honda Civic Sport MSRP was $20,150 brand new, whereas a 2023 Honda Civic Sport MSRP is $25,350 — a 26% increase in just five years. With the cost of vehicles only being a portion of what is paid during a claim — other factors to consider are medical costs for injuries and labor costs — most people are only seeing increases in their premiums of anywhere from 5%-25% over that same five-year time. There are many factors that can positively impact your rates, and having a discussion with your agent can help find the best options for you.”

insurance coverage

Closing Gaps in Your Insurance Coverage

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insurance coverage

Buying insurance is about sharing or shifting risk, but you may think you’re covered for specific losses when, in fact, you’re not. Here are some common coverage gaps to consider when reviewing your own insurance coverage.Life Insurance

In general, you want to have enough life insurance coverage (when coupled with savings and income) to allow your family to continue living the lifestyle to which they’re accustomed. But changing circumstances may leave a gap in your life insurance coverage.

For example, if you have life insurance through your employer, a job change could affect your coverage. Your new employer may not offer the same amount of insurance, or the policy provisions may differ. Review your income, savings, and expenses annually to help ensure that the amount of life insurance you have matches your needs.

Homeowners Insurance

It may not be clear from reading your homeowners policy which perils are covered and how much damage will be paid for. It’s important to know what your homeowners policy covers and, more important, what it doesn’t cover.
You might think your insurer would pay the full cost to replace your home if it were destroyed by a covered occurrence. But many policies place a cap on replacement cost up to the face amount stated on the policy. You may want to check with a building contractor to get an idea of the replacement cost for your home, then compare it to your policy to be sure you have enough coverage.

Even if your policy states that “all perils” are covered, most policies carve out many exceptions or exclusions to this general provision. For example, damage caused by floods, earthquakes, and hurricanes may be covered only by special addendums to your policy, or in some cases by separate insurance policies altogether. Also, your insurer may not cover the extra cost of rebuilding attributable to more stringent building codes, or your policy may limit how much and how long it will pay for temporary housing while repairs are made.

To help avoid these gaps in coverage, review your policy annually with your insurer. Also pay attention to notices you may receive. What may look like boilerplate language could actually be significant changes to your coverage. Don’t rely on your interpretations — ask for an explanation from your insurer or agent.

Auto Insurance

Which drivers and what vehicles are covered by your auto insurance? Most policies provide coverage for you and family members residing with you, but it’s not always clear-cut. For instance, a child who is living in a college dorm is probably covered, but a child who lives in an off-campus apartment might be excluded from coverage. If you and your spouse divorce, which policy insures your children, particularly if they are living with each parent at different times of the year? Notify your insurer about any change in living arrangements to avoid a gap in coverage.

Other gaps include no coverage for damaged batteries, tires, and shocks. And you might not be covered for stolen or damaged mobile phones or other electronic devices. Your policy may also limit the amount paid for a rental while your vehicle is being repaired.


In fact, insurance coverage for rental cars may also pose a problem. For instance, your own collision coverage may apply to the rental car you’re driving, but it may not pay for all the damage alleged by a rental company, such as loss of use charges. If you’re leasing a car long term, your policy may cover the replacement cost only if the car is a total loss or is stolen. But that amount may not be enough to pay for the outstanding balance of your lease. Gap insurance can cover any difference between what your insurer pays and the balance of your lease.


Policy terms and conditions aren’t always easily understood, and you may not be sure what’s covered until it’s time to file a claim. So review your insurance policy to help ensure you’ve filled all the gaps in your coverage.

keeping your auto and home insurance low

Keeping Your Auto and Home Insurance Low

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keeping your auto and home insurance low

As a responsible adult, you know that you need to have auto and home insurance. But that doesn’t mean you have to break the bank to get it. In fact, you have many options to keep your rates low.

On average, most homeowners pay over $1,300 a year on insurance. That can be a hefty financial burden, but it doesn’t have to be. Here are some steps you can take to keep your auto and home insurance low:

Consider One Insurer

You can often save money by choosing one insurer for your auto and home insurance. Most insurers offer discounts for having multiple policies with them. You’ll also only need to work with one company for both policies when the time comes to make a claim. Loyalty to one company can also prove profitable. Some insurance companies also reduce the rate for customers who have been with them for a long time.

Increase Your Deductibles

Raising your deductibles is a great way to lower your premiums. A higher deductible means you’ll pay more when you make a claim, but it also means that your monthly premium will be cheaper. This, of course, is a judgement call that you need to evaluate and investigate. Make sure you choose an amount you can afford in the event of an accident or other incident.

Don’t Forget to Account for Home Improvement

Some improvements can reduce the risk of damage and help you save money on your insurance through discounts. This includes deadbolt locks, storm shutters, smoke alarms, and fire extinguishers. Inform your insurer about any improvements you make so that they can adjust your policy accordingly. In fact, it’s always a good idea to foster and maintain a regular dialogue with your insurer.

Take Advantage of All the Discounts

Insurance companies offer a variety of discounts for different things. These can include good driver discounts, multi-policy discounts (Having multiple policies with one company), student or military discounts, and more.

Another source of discounts may come from affinity programs. These may be offered through certain employers, professional organizations, and universities. Ask your insurance provider if you qualify for any of these types of available discounts.

Compare Different Providers

Comparing different providers when shopping for auto and home insurance is a good idea. Some companies may offer lower rates for the same coverage, so it’s worth looking around. You can use an online comparison tool or speak to an independent insurance agent who can help you find the best deal.

Although bundling multiple policies with one company is often the most cost-effective option, it doesn’t always mean it’s the best choice for your situation. Cheaper isn’t always better.

Conclusion

By following these steps, you can keep your auto and home insurance costs low while still getting the coverage you need. Check with your insurance provider to ensure you get the best deal possible. With a little effort, you can save money on your insurance premiums without sacrificing the quality of your coverage.

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