Savvy Strategy:
Using Term Life Insurance as Part of Sound Financial Planning
Solid financial planning is more than simply making good
investments. It’s also about protecting the people who
depend on you financially if you die. One of the easiest,
most reliable and least expensive ways to do this is with
term life insurance.
Term life insurance is “pure protection” and
pays a guaranteed amount of money if you die while your policy
is in effect and your premium payments are up to date. Your
premium payment amount is determined at the time you purchase
your policy and remains level for the entire term length of
the policy you select— 10, 15 or 20 years, for example.
You choose the amount of term life insurance coverage or “face
amount.” The benefits paid to survivors are income tax-free1,
and in most cases, the premium cost is substantially lower
than permanent life insurance policies. (Permanent policies
typically cover you for your lifetime, not a term, and they
build cash value while you are living.)
Affordable protection while your retirement
investments mature
“There are several reasons term life insurance is
a smart way to anchor a financial plan,” says Ron Harris,
president of Matrix Direct (www.matrixdirect.com), one of
the nation’s largest direct marketers of term life insurance.
“Most financial plans include retirement investments
that mature when you’re no longer earning money. But
what happens if you die during the income-earning years? How
will your income and debts be covered? Will your loved ones
need to sell your home or use a child’s college tuition
to pay debts, taxes or to survive?” Term life insurance
can provide ongoing living expenses, as well as protect the
estate you are creating today and the long-term investments
planned for the future.
Another benefit offered by many term life insurance policies
is that the premium is determined when you first acquire your
policy and can be guaranteed to never go up throughout the
term of the policy. Since rates are often more affordable
for those who are younger and in good health, it can be very
advantageous to purchase a policy early. In addition, the
benefit amount or coverage is guaranteed to never go down
during the term period, no matter how your health changes
over the years.
Term life insurance offers flexibility as your life changes
As your estate grows or your needs change, you might decide
to change the amount of coverage or convert the policy to
permanent life insurance, which many policies allow. A young
family starting out might need different coverage compared
to a couple nearing retirement whose children have graduated
from college. “In the same way you periodically review
a financial plan and adjust it, you should also review your
term life insurance,” Harris says. “As your financial
picture changes, your life insurance needs might also.”
Licensed agents assist with the process — at no charge
Starting a financial plan that includes term life insurance
begins by speaking with a licensed agent free of charge. The
insurance professional will provide information on options
and basic rates so that you (together with your financial
planner, if you have one) can decide how much coverage you
need. The agent will also discuss your medical history and
lifestyle, and arrange a free, simple medical exam, which
is required to evaluate your health status so the insurance
provider can identify your accurate rate class and premium.
“An effective financial plan looks to the future while
protecting or enhancing the present,” Harris says. “Term
life insurance is an easy, affordable way to protect your
investments — and your loved ones.”
1Additional tax and legal considerations
may be involved. The tax treatment of life insurance as well
as the concepts presented is subject to change. Neither Matrix
Direct nor its Representatives offer legal or tax advice.
Investors should consult their attorney or tax advisor regarding
their individual situation. You should consult your individual
attorney for tax and estate planning advice.
