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What Type of Life Insurance is Right For Me?


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American Bar Endowment sponsors insurance programs for ABA members. This free eBook explores the types of life insurance coverage available and helps ABA members determine for themselves the types of life insurance to consider.

Published in: Economy & Finance, Business
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What Type of Life Insurance is Right For Me?

  1. 1. WHAT TYPE OF LIFE INSURANCE IS RIGHT FOR ME? From the American Bar Endowment ITIEbook-5-13
  2. 2. Founded by the ABA in 1942, the §501(c)(3) not-for-profit American Bar Endowment (ABE) offers quality, affordable insurance exclusively to ABA members, while giving back to the good works of the legal profession. ABA members can support ABE's charitable work by donating any available dividends to ABE to help fund over 200 legal research, public service and educational projects. Apply for the insurance protection you need and support the good works of the legal profession. Learn more about some of the projects supported by member-donated dividends. All ABE-sponsored plans are group insurance plans, meaning coverage is issued to an ABA member under a Certificate of Insurance. It is not provided under an individual policy, nor is it employer/employee insurance. Plans may vary and may not be available in all states. © 2013 American Bar Endowment ITIEbook-5-13
  3. 3. YOUR FAMILY. YOUR HOME. YOUR LEGACY. Each is an important element of your life. Do you have plans in place to help safeguard yourself and your loved ones should your financial security be threatened? The proper life insurance coverage can help provide you with protection, peace of mind, and a plan for the future. ITIEbook-5-13
  4. 4. With life insurance, you’re helping to provide for the future: Allow loved ones to better maintain their current lifestyle, with a benefit level that will help pay bills such as a mortgage Help fund the expense of a college education for your children Provide a better financial foundation for your firm to help ensure its continuation Provide a gift to your favorite charity ITIEbook-5-13 Why life insurance?
  5. 5. What is available? When considering available life insurance options, keep in mind that a combination of two or more of the following products may be the right answer for you right now: • Level Premium Term Life • Increasing Premium Term Life Term • Whole Life • Universal Life • Variable Universal Life Permanent ITIEbook-5-13
  6. 6. Whether an individual policy or a group certificate, term life is probably the most basic form of life insurance. It can be an affordable product, providing protection for a limited time period. There are two types of Term Life Insurance: Term Life Level Premium Term . Increasing Premium Term . ITIEbook-5-13
  7. 7. Level Premium Term Life provides a level benefit amount – meaning the benefit amount does not reduce as you age – for a rate that does not increase during the specific period, or “term.” Term lengths can be 5, 10, 15, or 20 years. At the expiration of the term, you can generally renew for a new specified term, but the rate for the subsequent term will be higher. The length of term that’s right for you will depend on the length of time you’re committed to financial obligations, such as a 20-year mortgage on your home, or children who will be independent in 10 years. Level Premium Term Life ITIEbook-5-13
  8. 8. Once approved based on medical underwriting, Increasing Premium Term Life is renewable every year until expiry age (which may vary by state) without providing evidence of good health. But, as the name implies, the premiums increase annually or at regular age breaks. With all term life insurance products, a benefit will be paid to your beneficiary should you die within the specific term in force. If you survive the term and do not renew for another term or convert to a permanent life insurance plan, there is no benefit payable. Increasing Premium Term Life ITIEbook-5-13
  9. 9. Permanent life insurance is known as “cash value” insurance because it accumulates a cash value which can be borrowed against – which will affect the policy’s value and would require a payment of loan interest. Cash value insurance generally has higher initial premiums than term, and most permanent polices are eligible for dividends (although dividends are not guaranteed). Permanent Life Insurance Whole Life . Universal Life . Variable Universal Life ITIEbook-5-13
  10. 10. Whole life insurance is permanent insurance that protects you for your whole life, from the day of purchase until death, provided premiums are paid. Cash values accumulate every year on a tax-deferred basis and can be accessed through a policy loan or withdrawal, which reduces the death benefit. Premiums remain level and are guaranteed never to increase. You may consider whole life insurance to help pay off outstanding debts or to cover estate expenses. Whole Life ITIEbook-5-13
  11. 11. Universal life is permanent life insurance that provides access to cash values that grow tax-deferred at Universal Life competitive interest rates. It is adjustable life insurance in that it allows flexible premium payments – at scheduled or unscheduled times – but the policy will terminate at any time the cash surrender value is insufficient to pay the monthly deductions, whether due to insufficient premium payments, if loans or withdrawals are made, or if current interest rates or charges fluctuate. ITIEbook-5-13 It will pay the benefit if the insured dies before the maturity date or pays the cash value if the insured is living at the maturity date. Premiums increase each year, based on your age. Administrative expenses and insurance costs are subtracted from any paid premium when calculating cash value. Dividends are not payable.
  12. 12. Variable Universal Life combines the premium and death benefit flexibility of traditional universal life and Variable Universal Life the investment flexibility and risks of variable life insurance. The cash value fluctuates with the market value of investments chosen by the policyowner. Because of this risk – assumed by the policyowner – variable universal life products are considered securities. As is the case with Universal Life, all administrative expenses and insurance costs are subtracted from any paid premium when calculating cash value. ITIEbook-5-13
  13. 13. Everyone is different. Even lawyers in the same life stage may have different financial goals or responsibilities. The multitude of life insurance options has evolved because of the varied needs of individuals. You are the only person who can decide what type of insurance and how much coverage you need, and these needs change over time. As your wealth and obligations change, so too will your need for life insurance. Why so many options? ITIEbook-5-13
  14. 14. Remember that you will usually be required to furnish evidence of insurability – your health history – for the initial application for any life insurance product. How Do I Decide? Things to consider: 1. Costs. Make sure the cost of coverage fits in your budget. 2. Product features. Make sure the product, or products, you select fit your needs. 3. Financial strength of the insurance underwriter. Check with rating agencies, such as Fitch’s, A.M. Best and Standard & Poor’s to ensure your claim will be paid when the time comes. ITIEbook-5-13
  15. 15. Find out more: ABE offers ABA members quality, affordable insurance plans and the chance to give back to the good works of the legal profession. So, you may find the insurance plan solutions best suited to you right here. Call today to learn more* about the ABE-sponsored insurance plans offered exclusively to ABA members. *including plan features, costs, eligibility, renewability, limitations, exclusions and plan carriers. Toll Free: 800-621-8981 Solo/Small Firm Toll Free Help Line: 877-621-7676 ITIEbook-5-13
  16. 16. DISCLOSURES: All ABE-sponsored plans are group insurance plans, meaning coverage is issued to an ABA member under a Certificate of Insurance. It is not provided under an individual policy, nor is it employer/employee insurance. Plans may vary and may not be available in all states. Portability is subject to U.S. government regulations. In addition, each Group Policy is written with specifics that govern termination of coverage. ITIEbook-5-13