As much as we don’t want to think about the unthinkable — we must.  Planning for your death can be depressing, but it’s a necessity in order to protect those we leave behind, our beneficiaries. 

Life insurance is an important part of your long term financial planning. Life insurance is important for everyone; however it’s most crucial to the primary bread winner of a family.  If something were to happen, life insurance will make sure your loved ones are taken care of financially.  

Life insurance policies are suggested for stay-at-home moms as well, because in the event of death, loved ones would be able to use that money for child care, pay off debts, other expenses that the mom would have been responsible for doing. 

• Budget – how much can you spend a month on life insurance
• The amount of coverage you need — who are your beneficiaries and what would it take to secure their financial future if something were to happen to you.
• Length of time you'd like the coverage to last

Let’s take a look at the different kinds of policies offered at Corrigan:

What is Term Life Insurance?
Term life insurance is simplest and most popular form of life insurance.  It is inexpensive and tax-free.  All of the money paid toward the premium is used to pay for the insurance itself.  Because the cost is low, you can buy more of it for a shorter period of time.

Term Life is available for set periods of time such as 10, 15, 25, or 30 years.  It automatically renews each year and the premiums increase in cost as you get older.  Choose "level term insurance" if you want your premium to stay the same for the duration of the policy.  Also available is "decreasing term insurance," where premiums remain level but your death benefit declines over time.

Who is Term Life Insurance best for?
Term Life Insurance is best for young people. Term Life is a good choice when you need insurance for only a short period of time, or you cannot afford the premiums associated with permanent insurance.  

What are the disadvantages to Term Life Insurance?
The policy must be renewed annually and does not accrue equity over time. As you get older, the price will increase due health problems that arise and because getting older puts you at a higher risk of dying. Another downside is that if health problems materialize and your policy is non-renewable, your premiums may increase or you may no longer qualify for insurance. This problem can sometimes be avoided by paying higher rates for renewable term life, allowing you to renew the same policy without re-qualifying.

What are the advantages of Term Life Insurance?

• Term life is inexpensive
• No penalty for not renewing
• Tax-free
• May allow for partial payout in you are diagnosed with a terminal disease
• Option of Guaranteed Renewal:  offers you the choice to continue your coverage beyond the initial rate guarantee period without a medical exam.  This is very helpful if you should become sick and uninsurable as you near the end of your rate-guarantee period
• Option of Guaranteed Convertible: Allows you to covert you coverage to any of the cash value policies (Whole, Universal, or Variable) without having to take another physical exam.

These policies give people the benefit of building a long-term savings account (not federally insured) — one that may give you the option of partially withdrawing or borrowing against if need be.  These policies combine a death benefit similar to a term life plan with tax-sheltered savings arrangements.  These are long-term plans and are typically more expensive because they offer fixed premiums as well as flexibility in areas such as coverage, savings, and investments.

There are three different types of Cash Value Insurance Policies:

• Whole Life Insurance
• Universal Life Insurance
• Variable Life Insurance

Whole life insurance is the most basic form of Cash Value Life Insurance. As long as you continue to make the regular premium payments (monthly, quarterly, semi-annually, or yearly) the cost is guaranteed for the entire life of the policy.   As your policy ages so does the cash value of the policy, and although it is not federally insured, it grows like a savings account.  In addition, your death benefit is guaranteed to remain the same over your entire life.

Whole life policies allow you to borrow or partially withdrawal money from your policy with the cash value used as collateral. You pay the money back to yourself with interest over a set period of time.

Whole life policies are tax-deferred, meaning there are no taxes on annual gains and the death benefit is tax-free to your beneficiaries.  If you decide to cancel your policy, you would be paid the cash out amount which would be significantly less then the total value of the policy.

Universal Life insurance provides a bit more flexibility than whole life because it allows the policy owner to shift money between the insurance and savings sides of their policy.   The premiums vary and are divided into an insurance category and savings category by the insurance company.  The amount that is in each category is adjustable by the policy holder and is based on return on investment (however, you must remain insurable to increase your premium amount).  Savings can be used to pay your premium.  In addition, you can choose to pay more of your premium then necessary to increase the death benefit.  This is in contrast to whole life policies where you can only grow your cash value monthly. 

By having more flexibility with what you contribute to your policy, you can take advantage of higher interest rates as they happen.  However, one must understand that if interest rates decline, premiums will rise.

Variable life offers a death benefit with a side fund that operates like an investment account.  It shifts the uncertainties of investment gains and losses to the policyholder.  The policy holder chooses their investments for the savings portion of the account.  Even though the premiums are fixed under variable universal life, the fees are typically higher and the return of investment is not guaranteed.  All the risk lies with the policy holder and you are at the mercy of whether your portfolio does well or not.  In some cases, there are caps to how low the death benefit can drop if the investments go sour.

Variable universal life adds to the flexibility of universal life by allowing the holder to choose among investment vehicles for the savings portion of the account. The only differences between this arrangement and investing individually are the tax advantages and fees that accompany the insurance policy.

There are many factors that go in to determine life insurance eligibility.  Let’s take a looks at some of the factors:

• Age and gender of policy holder
• Medical history/pre-existing conditions (you fill in form, but many companies also use database of Medical Information Bureau)
• Family medical history (For instance, did your parents have a history of heart disease or cancer?)
• Results of medical exam (various tests usually required for higher amounts of insurance; the higher the value the more stringent the criteria). Typical tests include:
• Cholesterol level
• Blood sugar level
• Blood pressure
• Weight
• Urine tests
• Other blood tests
• EKG
• Stress test
• X-rays
• Smoker or not
• Mental health record
• Occupation
• Lifestyle issues, such as leisure activities that the insurance company considers risky (For example, not just bungee jumping or race car driving but mountain climbing and scuba diving may concern an insurer.)
• Driving record
• Where you travel regularly
• Features, coverages and limits selected
• Credit history

(source: www.dfu.org)

A beneficiary is the person(s), trust, or estate named by the owner of the policy to receive the life insurance proceeds upon the death of the insured.

The amount of money you can receive if you surrender your life insurance policy or annuity or the amount that is available in cash for loans and/or withdrawals. Determining the cash surrender value may reduce the death benefit and may increase the risk of lapse. Withdrawals may be subject to surrender charges and could have a permanent effect on the cash value. Loans reduce the cash value and death benefit by the amount of the loan outstanding plus interest.  If the policy is surrendered, the cash surrender value is paid to the policy owner. If there is a policy loan, the cash surrender value is the difference between the cash value printed in the policy and the loan value to pay the premiums.

Convertible Term Insurance is a policy that may be changed to another form by contractual provision and without evidence of insurability. Most Term policies are convertible into permanent insurance.

A dividend is a return of part of the premium on participating insurance that is based on the insurer's investment, mortality, and expense experience. Dividends are not guaranteed.

The Face Amount is the amount stated on the face of the policy that will be paid in case of death.  Additional amounts payable under accidental death or other special provisions are not included, or acquired through the application of policy dividends.

Insurability means acceptability to the company of an applicant for insurance.

The person on whose life the policy is issued.

Level Premium Life Insurance is a form if insurance for which the premium remains the same year to year. Almost all Whole Life Insurance is paid for in this way. Premiums are higher in the initial years of policy but decrease in cost as the policy ages.

A loan made by an insurance company to a policy owner that equals a part or the entire cash value of the policy assigned as security for the loan. Usually, loans reduce the policy's death benefit and cash value by the amount of the outstanding loan plus interest.

Insurance on which all premiums are paid but which has not yet matured by either death or endowment.

A life insurance policy that is eligible for the payment of dividends by the insurer.

Permanent Life Insurance is any form of life insurance except term; generally insurance that builds up a cash value, such as whole life, universal life, or variable life.  Coverage can last a lifetime.

The policyowner is the person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a trust, partnership, or a corporation.

Premiums are payments to the insurance company to buy a policy and to keep it in force.

Renewable Term insurance can be renewed at the end of the term, at the option of the policyowner and without evidence of insurability, for a limited number of successive terms. The rates generally increase at each renewal as the age of the insured increases.