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Life Insurance
Not that many years ago – no more than, say, 50 – the major component of a personal financial plan was life insurance, specifically what is called “whole life.” While indemnifying the policyholder against death, as well as such optional conditions as disability or maiming, a whole life insurance policy invested part of the premium and thereby accrued cash value.
Today the financial market is much more varied, and life insurance is just one of many components in a comprehensive personal or corporate financial plan. After car insurance and health coverage, the latter often provided by employers, life insurance is the type of policy most familiar to most people. There are also different kinds of life insurance, suitable for different situations.
Whole life, term life
Besides whole life, there is term life insurance. Term life insurance does not build equity like whole life, therefore it costs less for the same coverage amount, which premium payments keep in force for a set number of years, or “term.” Insurers compete on a number of factors, including what level of medical examination is required (sometimes none), rate guarantees and the length of exclusionary periods.
Exclusionary periods are blocks of time at the beginning of a policy during which reduced benefits are paid out. The feature was developed to foil life insurance scams, such as suicides staged as accidents. A waiting period, from several months to several years, tends to discourage such attempts, as there are easier and faster ways for swindlers to make money.
What gets insured?
You won’t know how to calculate the amount of life insurance you or a loved one need until you recognize what it is that is being insured. It is actually the loss of future earnings that working-age people should be insuring against with their various policies. There are considerations of income, assets, retirement, medical coverage and so on, so it is no longer as easy as it was when you were first on your own. Complicated lives need comprehensive financial plans.
A financial planner is not a life insurance agent, but some life insurance agents study and become financial planners. The states require licensure for insurance agents of all kinds, and there are also professional designations (CLU, Chartered Life Underwriter) that signify a certain level of study and attainment. The policies themselves are underwritten, or funded and managed, by some of the largest corporations in America. Financial services companies like Citicorp and Prudential have numerous divisions, including insurance and investments, and can offer a “one-stop shop” for planning and coverage.
Times change, policies should, too
As you pass various life milestones, you would be wise to reevaluate your investments, financial and retirement plans, will and insurance policies. When you have more to lose, you need more insurance against the loss. When your time becomes more valuable, your inability to work and provide for your family costs you more money, more quickly. Life insurance is a major component of any wise, well-conceived financial plan.
The time is always right to get started, if you have, in fact, left yourself uninsured. No matter what your age or earnings, there is a plan that can incorporate at least a basic level of life insurance as it also addresses issues of health, medicine, retirement and, yes, death. Life insurance, burial arrangements and memorial services may not be the cheeriest subjects to discuss, but avoiding the issues will not do you or your family any good. If you haven’t done so already, take a look at your financial situation and find out what part life insurance can play in securing yourself and your loved ones.
Topics: Insurance |
