Life insurance 101: What you need to know
(BPT) - Life insurance. Everyone says it’s important, but it can be a difficult topic to talk about and even more difficult to understand. However, it is critical to understand this topic because of its importance to building your financial strategy.
Life insurance can help you provide for the people and organizations you care about. Choosing the right life insurance solution gives you peace of mind knowing your loved ones will be taken care of. Here’s a quick primer from Thrivent Financial for Lutherans on some of the most common types of life insurance.
* Term life insurance – Temporary life insurance that offers a death benefit and is generally less expensive than permanent insurance. It's ideal for short-term life insurance needs, like when you are raising a family, paying off a mortgage or starting a business.
* Whole life insurance – Permanent life insurance that gives you a guaranteed death benefit, guaranteed level premiums and a guaranteed cash value that increases each year. The guarantees are contingent on all premiums being paid and no loans or changes being made to the contract.
* Whole life plus term protection – Permanent life insurance with added flexibility. It lets you "dial-in" your premium to the level of whole life and term insurance desired. This insurance offers lifetime protection through a blend of whole life insurance plus term insurance and paid-up additional coverage.
* Universal life insurance – Permanent life insurance that allows you to increase or decrease your death benefit and your premium is flexible; subject to any limitations in the contract. Accumulated value in a universal life contract earns interest at the current rate, with a minimum rate stated in the contract.
* Variable universal life insurance – Permanent life insurance that gives you a flexible premium and the potential to build accumulated value. However, death benefits and other values may vary, because you direct how the cash is invested among the investment portfolios offered. The investment performance has no guarantees and you could lose money.
How much life insurance should you have?
When purchasing life insurance, think about your goals for your overall financial strategy, your economic value to your loved ones and your wishes for your survivors.
First you'll need to calculate your economic value - the value of your future earnings over your lifetime. To do so, consider the following factors:
* Your current annual earnings.
* The amount your annual earnings increase.
* How many years you plan to work until retirement.
* The rate of return you expect your invested assets to earn.
Use these numbers as a starting point when you sit with a financial professional to determine the level of coverage you might need. Remember to consider how much of your future economic value you want to replace in the event of your death. This will depend on the financial goals you set for yourself and your survivors.
Life insurance is an essential part of any healthy financial program. It is important that you choose what’s right for you and your situation and that you plan accordingly with a licensed professional.
To learn more about any of these contracts you can visit www.thrivent.com.
EDITOR’S NOTE:
About Thrivent Financial for Lutherans
Thrivent Financial for Lutherans is a faith-based, Fortune 500 financial services membership organization helping its nearly 2.5 million members to be wise with money and to live generous lives. Thrivent Financial and its affiliates offer a broad range of financial products and services. As a not-for-profit organization, Thrivent Financial joins with its members to create and support national outreach programs and activities that help congregations, schools, charitable organizations and individuals in need. For more information, visit Thrivent.com. Also, you can find us on Facebook and Twitter.
Insurance products issued or offered by Thrivent Financial for Lutherans, Appleton, WI. Not all products are available in all states. Securities and investment advisory services are offered through Thrivent Investment Management Inc., 625 Fourth Ave. S., Minneapolis, MN 55415, 800-847-4836, a FINRA and SIPC member and a wholly owned subsidiary of Thrivent Financial for Lutherans. Thrivent Financial representatives are registered representatives of Thrivent Investment Management Inc. They are also licensed insurance agents of Thrivent Financial.
For additional important disclosure information, please visit Thrivent.com/disclosures.