Life insurance is a unique asset, which can be used to solve some of life's perplexing financial problems due to potentially high yield and its tax-favored benefits.
Life Insurance Can be Used to...
How Much Life Insurance Should an Individual Own?
- Create an estate where time or other circumstances have kept the estate owner from accumulating sufficient assets to care for his or her loved ones.
- Pay death taxes and other estate settlement costs. These costs can vary from a low percentage of three to four percent to over 50% of the estate.
- Fund a business transfer when business owners agree to buy a deceased owner's share from his or her estate after death.
- Life insurance provides the ready cash to finance the transaction.
- College fund for children or grandchildren.
- Pay off the home mortgage in order to pass the family residence on to a spouse or children free of any mortgage.
Experts suggest an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed. Important factors include: income sources and amounts, whether or not the individual is married and, if so, what is the spouse's earning capacity, the number of individuals who are financially dependent on the insured, the amount of death benefits payable from social security and from an employer-sponsored life insurance plan, whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc.
Should Term or Cash Value Life Insurance be Purchased?
This question involves an "insurance" decision and a "financial" decision. The "insurance" decision should always be resolved first. For example, the amount of life insurance that you need may be so large that the only way in which this needed amount of insurance can be afforded is through purchase of term insurance with its lower premium. If your ability and willingness to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, it is then appropriate to consider the "financial" decision - which type of policy to buy. Important facts affecting the "financial" decision include your income tax bracket, whether the need for life insurance is short-term or long-term, and the rate of return on alternative investments possessing similar risk.
Are There Any Special Life Insurance Plans for Tobacco Users?
If you are frustrated by the high cost of term life insurance because you choose to use tobacco, then Smoker's Choice could be for you.
With Smoker's Choice, preferred tobacco users may qualify for non-tobacco rates. If you qualify for the Smoker's Choice program, you get to keep the lower, non-tobacco user rates for the first four years of the policy. If you break the habit during that time and your health has not changed, you can qualify to keep the non-tobacco user rates.
How Much Will Life Insurance Cost?
Individuals are rated by their age, health history, type of life insurance protection, and in some cases, by their careers. Younger people generally have lower premiums.
To find out more about life insurance, please call 865-481-4964 or e-mail
- These products are NOT insured by NCUA, are NOT deposits, are NOT obligations of, or guaranteed by Y-12 Federal Credit Union and are
subject to investment risks. Investment risk includes possible loss of the principal amount invested.
- Securities transactions are executed through Financial Security Services, Inc.