B&A Insurance Plans
Life Insurance
Things to Consider - Life Insurance
Determining what type of life insurance you need and how much you need can be confusing, so here's some rules of thumb;
How much life insurance do you need?
Most experts recommend 8 to 10 times your annual gross income (before taxes). For example, if you make $50,000 per year, a $500,000 death benefit would supply an inflation indexed income of $50,000 for about 15 years, assuming a 3% inflation index and a 8% return on investments. In order to get a more accurate amount of what you may need, go to our Term Life quoting tab and click the Help button next to the Life Insurance Amount to quote.
How long do you need the insurance for?
This is really a personal choice, however, most younger people with children would be well advised to lock in the rates until the youngest child is through college or married (or 25 years old, whichever comes first). For people in their 40's and 50's and beyond, the major consideration is to provide funds for the surviving spouse while the retirement "nest egg" is being built up. Most people would do well to have the benefit last at least 5 years beyond expected retirement age, thus giving them a little "time cushion" in the event that accumulation within the retirement funds doesn't go according to plans.
Types of Life Insurance
Life Insurance can be very confusing, so here's a quick descriptive list of the different types of life insurance available. Keep in mind that definitions may vary slightly from company to company and from state to state:
Term insurance
The simplest form of insurance. You purchase coverage for a specific price for a specified period. If you die during that time, your beneficiary receives the value of the policy. There is no investment component, and there is no cash value at the end of the policy term. To get a quick quote on the lowest cost policy from over 180 different carriers, click here
Term Insurance with Return of Premium Rider
Simply put, this is the same as above but with a rider that assures a return of all premiums paid at the end of the term, provided that no death has occurred. To receive a quote on a low cost term policy with return of premium rider, click here. For More Information on Return of Premium policies, click here.
Whole life
You purchase the policy to cover your "whole life" not just a set period. Premiums remain level throughout the life of the policy, and the company invests at least a portion of your premiums. Some firms share investment proceeds with policyholders in the form of a dividend. Many companies will offer "a relatively low guaranteed rate of return," but in reality pay at a rate in excess of the guarantee. Whole life is generally the only type of life insurance that guarantees the death benefit, the premium and a certain amount of cash value for the life of the individual.
Universal life
You decide how much you want to put in over and above a minimum premium. The company chooses the investment vehicle, which is generally restricted to bonds and mortgages. The investment and the returns go into a cash-value account, which you can use against premiums or allow to build. Most Universal Life policies do not guarantee the premium for the lifetime of the policyholder, so premiums can go up drastically in later years if the policy's performance falters. To combat this, some insurance companies are now beginning to offer policies that have minimum premium guarantees for the life of the policyholder, making these new breed of universal life policies much safer purchases than the UL's of the past.
Variable life
With a variable policy, there is usually a wider selection of investment products, including stock funds. As with a universal policy, returns on investments can offset the cost of premiums or build in the account. And depending on the type of policy, the beneficiaries will either receive the face value of the policy or the face value plus all or part of the cash account. The underlying funds within a variable life contract are similar to a mutual fund, and can lose value as can any equity investment.
