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.)
"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.
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."
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.