Life Insurance Plans from Sedona Benefits
You probably insure your home, your car, and your possessions. But is your life fully insured? Almost everyone needs life insurance. It is of utmost importance that the income earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance. In a dual-earning household, it is important to protect the earning capacity of both spouses. Life insurance on a non-wage earning spouse is often recommended for the purpose of paying for household services lost at this individual’s death. If you, your spouse, and children don’t have enough, your family’s future could be at risk.
In general there are two categories of Life insurance – term and whole life:
Term insurance is temporary insurance and is life coverage only:
Whole life insurance combines a term policy with an investment component and is considered permanent insurance:
There are blended policies that have both term and whole life in one policy for a lower premium cost. In addition, there is universal life and variable universal life that mixes permanent and term in one policy.
How do you tell how much life insurance you need? The first thing to determine is the amount of your outstanding monthly obligations, then you need to determine your future obligations such as college costs and taxes on retirement plans. In addition you need to look at inflation. Your cost of living today will increase by 2 to 10 percent per year due to inflation. If you are spending $75,000 per year to live in 2006 dollars you will need more money to live 10, 20, 30 or 40 years from now. Typically people need 10 to 20 times their income in life insurance and other liquid assets.
Most people are substantially underinsured based on their income and their consumption. It is good to run a human life value calculation to see what you are worth to your family in the event of your death. To compare alternative policies you need to look at how long you will need the coverage, what your financial situation is now, and what the outlook for you and your family is in the future.
If you do not need your life insurance any more there are several options depending upon your age and state of health.
You should review your insurance coverage every few years. Perhaps your income has increased or decreased. You may have more responsibilities such as new children, new marriage, a spouse not working any more, or larger debt obligations. The amount of coverage and the type of coverage may need to be changed or modified. You may be at the tail end of a 10 or 20-year term life insurance policy and the rates are ready to increase substantially.
For most people, the right type of life insurance can be summed up in a single word - term. Premiums for term insurance are downright cheap for people in good health up to about age 50. After that age, premiums start to get progressively more expensive. The same holds true for whole life policies, though people who need coverage starting in their 60s and beyond may have no alternative but to buy whole life. Some companies simply won't sell term policies to people over about age 65.
If you're looking for whole life coverage or a term policy that you'll want to keep 20 or 30 years, the financial soundness of the insurer is a critical concern. You want some assurance the company will be around in case you aren't. For insurance companies, the major credit agencies like Standard & Poor's rate claims-paying ability.
Fortunately, information on the credit worthiness of insurance companies is easy for Sedona Benefits to obtain for you. In general, go with an insurer rated A or better. The most financially sound insurers are rated AAA, though some rating agencies use slightly different letter grades.
Sedona Benefits can solicit quotes from over 20 carriers, which allows the client to choose the best combination of features, cost, and size and strength of the company.