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FOUR THINGS TO THINK ABOUT WHEN BUYING LIFE INSURANCE

9/23/2016

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 What is life insurance? The simplest definition is that it’s a financial service to help protect your loved ones. People primarily buy life insurance to solve a basic problem – one that’s not necessarily a whole lot of fun to consider – what happens if you die?  A life insurance policy is a good way to guarantee that the people you leave behind (or your favorite charitable causes) will receive financial protection after you’re gone. They will receive a sum of money that is generally tax-free that can be used to help take care of them.

Here we discuss a few common questions about life insurance:
  • Are there different types of life insurance, and if so, which is better? Life insurance comes in two basic varieties. Term life will cover you for set amounts of time, usually 1-30 years, with protection that expires when the period is up, meaning you would have to qualify for and purchase another policy to continue your coverage. The second type is permanent life insurance. Whole life, one of the most common types of permanent insurance, covers you during your entire life (as long as your payments to the insurance company remain current), while simultaneously building up a guaranteed cash-value, money you can use during your lifetime, that’s tax-advantaged.2 The advantage of whole life is that it doesn’t vanish with nothing to show for all the payments you've made. Note: some term life policies can be converted to a permanent product, such as whole life, throughout the duration of the term period.

  • How much life insurance would my loved ones require? Various insurance companies will calculate this in different ways. Factors could include: How many dependents you have, how much you expect to earn, what lifestyle you hope your loved ones can experience, and more. A simple rule of thumb is that if you’re in your 20’s, an ideal amount of coverage would be 30 times your income, and as you age, less may be required. In your 50’s, you might need only 10 times your income. However, each person deserves an individualized look, and insurance options and costs vary.



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  • I get life insurance coverage through my workplace. Is that enough? Many businesses include company paid life insurance as part of their employee benefits. While this is a worthwhile perk, look closely at the amount of money your loved ones would receive. Chances are that the base coverage wouldn’t meet your dependents’ costs for long.  You may be able to add more coverage by paying extra each pay period. Also, look into an insurance policy that you can take with you if you were to leave/lose the job. Some company packages are portable (you would generally have to continue making the monthly payments yourself), so that you can avoid your coverage expiring. If you’re not sure if your coverage at work is enough, seek some advice outside the workplace from an established financial representative.​

  • Do I have to pass a physical exam? For traditional group plans, such as those obtained at work, no exam life insurance policies are common for base coverage. For private plans, it varies. By not requiring a physical exam, an insurance company is gambling on the fact that you’re in reasonable health.  As a result, life insurance without medical exams tends to cost more and may cover you for a smaller amount of money. 

Life insurance is an important form of financial protection that can even be an asset used during your lifetime. Be sure to look into a policy sooner rather than later, as the older you get, the more a new policy would cost. It’s also important to look at the reputation of the company you purchase from, so that you’re sure the protection can be relied upon. While it may not be fun to contemplate a world without you, you’re doing this for your loved ones. 

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    Michael A. Waterhouse is a Financial Planner with the Independence Planning Group.

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    Independence Planning Group is an Agency of The Guardian Life Insurance Company of America (Guardian), New York, NY.

    Securities products and advisory services offered through Park Avenue Securities, LLC (PAS), member of FINRA and SIPC.

    OSJ: 1767 Sentry Parkway West, Suite 200, Blue Bell, PA 19422 / (267) 468-0822

    PAS is an indirect, wholly-owned subsidiary of Guardian. Independence Planning Group is not an affiliate or subsidiary of PAS or Guardian.

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​​Michael Waterhouse, Financial Advisor
Independence Planning Group
5100 W. Tilghman St. Suite 310
Allentown, PA 18104
Office: 484-860-3500
Cell: 484-225-3120