Making the decision to purchase life insurance is the most selfless gift you could ever give to the people you love the most. You’re putting their needs ahead of your own and ensuring they will always be taken care of. Life insurance is the essential foundation of protection, and it can grow and change as your needs change.
There are many different types of life insurance available, but the most important distinction is between term insurance and permanent insurance. As its name implies, term insurance provides coverage for a set term – 5 years, 10 years of 20 years, for example – while permanent coverage lasts a lifetime. Let’s talk for just a minute about the benefits of each type. Most important, both term and permanent insurance provide a death benefit to your beneficiaries that is generally tax-free. That’s the primary reason you’re buying a policy. Term insurance is initially the lowest-cost option. It provides basic protection for a fixed period of time, and at the end of the term, it can usually be renewed. Or you can upgrade it to permanent coverage. With permanent insurance, your coverage never expires, so long as you pay your premiums. And with a policy such as whole life, the premiums are guaranteed to remain level over the life of your policy. But the biggest difference between term and permanent insurance is that with permanent insurance, you are building up cash value. These cash values grow tax deferred, and you can access them without any tax consequences for any need that may arise (provided the policy is not a Modified Endowment Contract (MEC)), such as paying for a child’s college education or wedding. Keep in mind that any cash accessed from the policy either by policy loan or withdrawal will reduce the total death benefit and total cash value.
Here’s an easy way to think about the differences between term and permanent insurance. Term insurance is like renting a home, while permanent insurance is like home ownership. Both provide vital protection for your family. Just as renting can be the most economical way to get into the housing market, term is often the most cost-effective way to purchase the protection your family needs today. But when you own a home, you are building equity, and you have a valuable asset that you can borrow against to pay for other important needs, such as a child’s education. The same is true of permanent cash value life insurance. That’s why it makes sense to buy term insurance that can be converted later intro permanent coverage (like buying a home using a “rent to own” contract). You can also split your coverage between term and permanent insurance to maximize your flexibility.
To help determine which term policy is best for your particular needs, it’s important to consider how long you expect the policy to stay in force. Here are some statistics that you may find surprising. LIMRA – an independent insurance research organization – says that about 10% of all term policies are dropped each year. That means the policyholder has decided to stop paying for the coverage, perhaps because their needs have changed. So by year 10, 75% of term policies have been dropped! And overall, only 1% of term policies ever result in the payment of a death benefit, either because the policyholder decided to let the policy lapse, they upgraded it to permanent coverage, or they simply lived longer than the term of the policy. Give these statistics, it probably makes sense to look for a term insurance policy with the lowest costs in the early years.
For most term policies, the annual premiums you pay remain flat over the term of the policy. For example, on this chart, you can see that for 20-year term, you’d pay a level premium for 20 years, and then if you wanted to extend your coverage, the rates would rise sharply, because you’d be getting closer to life expectancy. But New York Life offers an innovative alternative. For our Increasing-Premium Term, you pay a relatively low premium initially, and as the name suggests, the premium increases annually. If you’re like most people, you may be better off with IPT or another short-duration policy. As the shaded area in the chart shows, the premiums are lower in the years the policy is most likely to remain in force, and you have the opportunity to review your coverage annually to see how your needs and financial situation may have changed. For people who maintain 20YT – and we know that 75 percent of people who buy term drop it – it may be an affordable and suitable alternative, this is particularly true for people who want a mix of insurance to meet a variety of needs.
This is another view of the chart I just showed you, focusing on the first 10 years of policy ownership. As you can see here, IPT annual premiums (the green bars) are lower than a typical low-cost 20-year term policy’s premiums (the orange line) for the first 7 years. IPT’s cumulative premiums are less than those for 20-year term for roughly 11 years. And if you invested the difference at 5%, it would be 12 years before you had paid more for IPT than for the “low-cost” 20-year term. And with the ability to do an “attained age” conversion for 10 years or until age 55, IPT allows you to “lock in” insurability for a longer period than most 20-year term policies.
One of the certainties in life is that events often cause our needs to change. Therefore, IPT or other short duration term allows you to Pay the lowest initial premium Re-evaluate your needs periodically Upgrade to permanent insurance when you can
Whether you’re renting or buying a home, it’s important to choose a good, safe neighborhood. The same is true when investing in life insurance. Whether you’re buying IPT, 20-year term or permanent coverage, you want to be sure you’re partnering with a company you can trust will be there – able to keep its promises – decades into the future. New York Life has been keeping promises to policyholders for more than 160 years, and we have the financial strength to be here well into the future. As a mutual company, we are owned by our policyholders. We do not have to meet the near-term demands of Wall Street analysts or stockholders. So we take a very prudent, long-term approach to our business that is standing us in extremely good stead today. Just like New York Life, I take a long-term approach when it comes to my clients. I want us to be in it together for the long haul! So my goal is to help you find the best solution now, with the flexibility to meet your needs in the future. I’d like to show you a possible plan that combines permanent and term coverage. The term insurance can be upgraded in small amounts as your circumstances change.
Just be sure to take the time to make the right choice. *Protect those you love and care about in your family and in your business *Start with a plan *Build for your future Keep in mind, life insurance is the most selfless gift you can give to those you love. Let's look at the numbers for your specific situation. SHOW ILLUSTRATION
Affordable Way To Protect What Matters Most 00386183 Cv Final
An Affordable Way to Protect What Matters Most 00386183CV
Protecting What Matters Most <ul><li>Purchasing life insurance is an important step in protecting your family and building your financial foundation </li></ul><ul><li>It’s the most selfless gift you can give to those you love </li></ul><ul><li>The key is to choose coverage you can afford today that is adaptable to changing needs </li></ul>
Two Basic Types of Life Insurance <ul><li>Term </li></ul><ul><ul><li>Generally tax-free death benefit </li></ul></ul><ul><ul><li>Initially the lowest-cost option </li></ul></ul><ul><ul><li>Basic protection for a fixed period of time </li></ul></ul><ul><ul><li>Renewable at the end of term or upgradeable to permanent </li></ul></ul><ul><ul><li>No cash value </li></ul></ul><ul><li>Permanent </li></ul><ul><ul><li>Generally tax-free death benefit </li></ul></ul><ul><ul><li>Coverage never expires, as long as premiums are paid </li></ul></ul><ul><ul><li>Level premiums over the life of the policy 1 </li></ul></ul><ul><ul><li>Tax-deferred cash value </li></ul></ul><ul><ul><li>Access cash value tax free 2 </li></ul></ul>1 Level premiums guaranteed on whole life insurance only. 2 cash value is accessed income tax free (provided policy is not a Modified Endowment Contract) through policy loans, which accrue interest at the current rate, and cash withdrawals. Loans and withdrawals will decrease the death benefit and cash value.
Renting vs. Owning <ul><li>Term insurance is like renting a home, while permanent insurance is like home ownership </li></ul><ul><li>Both provide vital protection for your family </li></ul><ul><li>Renting can be the most economical way to get into the housing market </li></ul><ul><li>But when you own a home, you are building equity, and you have a valuable asset that you can borrow against to pay for other important needs, such as a child’s education </li></ul><ul><li>That’s why it makes sense to buy term insurance that can be upgraded later to permanent coverage or to split your coverage between term and permanent insurance </li></ul>
What Happens to Term Policies? <ul><li>As a result, about 75% of term policies have been dropped by year 10 3 </li></ul><ul><li>Determining the most cost-effective policy depends on how long the coverage will stay in place </li></ul><ul><li>Only 25% of term policies are still in force after 10 years </li></ul><ul><li>Death benefits are only paid on 1% of term policies 4 </li></ul>3 LIMRA – “The Market for Term Insurance,” 2006 Report (page 33). 4 New York Life Term Study, 2007, which concluded that New York Life’s findings reflect industry findings. Year 1 Year 10 About 10% of policies drop per year due to upgrade to permanent coverage, lapse or death 3
Which Term Is Most Affordable? 20 10 20-Year Term Cost Increasing-Premium Term Cost Years Policy Is in Force <ul><li>If you’re like most people, you’re not likely to hold on to your policy for more than 10 years, so if you buy 20-year term, you’re overpaying . </li></ul>
IPT Can Be More Affordable Than 20-Year Term Years Term Policy Is Held Annual Premium ($) <ul><li>IPT annual premiums are lower than 20-year term premiums for the first 7 years 5* </li></ul><ul><li>IPT’s cumulative premiums are less than those for 20-year term for roughly 11 years 5* </li></ul>5 Based on a policy for a 35-year-old, male, non-smoker for a $1,000,000 death benefit * New York Life’s Increasing-Premium Term (Annually increasing premiums are guaranteed for the first 10 years. Premiums in the 11th year and later years are not guaranteed but will never exceed the maximum premiums stated in the policy.) New York Life’s 20-Year Level Term (the initial premium rate is guaranteed to remain level for the first 20 years. Starting in year 21, the premiums will increase annually but are guaranteed not to change from the premiums stated in the policy.)
The Term Secret <ul><li>Life events cause needs to change </li></ul><ul><li>Short duration term allows you to </li></ul><ul><ul><li>Pay the lowest initial premium </li></ul></ul><ul><ul><li>Re-evaluate your needs periodically </li></ul></ul><ul><ul><li>Upgrade to permanent insurance when you can </li></ul></ul>
Whether You’re Renting or Buying… <ul><li>It’s important to choose a good neighborhood! </li></ul><ul><li>Benefits of partnering with New York Life </li></ul><ul><ul><li>Unparalleled financial strength for more than 160 years </li></ul></ul><ul><ul><li>Mutually owned – especially vital today </li></ul></ul><ul><ul><li>Professional Agents with industry-leading training </li></ul></ul><ul><ul><li>Term products that can be upgraded to a full range of permanent plans </li></ul></ul><ul><ul><li>Broad selection of options to help customize your plan to meet your specific needs </li></ul></ul>
Take the Time to Make the Right Choice <ul><li>Protect your family </li></ul><ul><li>Start with a plan </li></ul><ul><li>Build for your future </li></ul>