Commentary: Life insurance is for the survivors

September 22, 2011 

Life insurance is something we all need, but few of us want to spend any time thinking about our own demise. It’s really not about us, but the people who depend on each of us for their survival. Life insurance is so important that the Life and Health Insurance Foundation for Education has designated September as Life Insurance Awareness Month. The foundation is encouraging people to examine their life insurance policies to determine if they are adequately protected.

Life insurance is a practical way to protect your family’s financial hopes and dreams. The death of a family member can be devastating to survivors both emotionally and financially. Life insurance can provide cash to help with your family’s immediate and long-term needs. Immediate needs include funeral expenses, unpaid medical bills and taxes. Long-term needs include care for a disabled child or elderly parent expenses and, in general, the chance for members of your family to continue to live the life to which they are accustomed.

There are many choices when it comes to purchasing life insurance. Term life insurance is temporary life insurance for a specific time period (one, five, 10 or more years). It can provide short-term coverage on a limited budget. Term insurance is based on age, so as you get older the cost will increase. There are three common types of term life insurance. Level term is the type of coverage where the amount of protection remains the same during the coverage period. Decreasing term is where the amount of protection gradually declines during the coverage period. A relative new type of term insurance is known as return of premium. If you live, your premiums are returned at the end of the coverage period.

Another type of life insurance is known as whole life. With this type of coverage the premiums are generally level with cash value growth throughout the life of the policy. The cash values can be borrowed (with interest charged) during the insured person’s lifetime to help meet temporary or emergency needs. One point to consider is that the funds borrowed reduce the death benefit and cash surrender value.

When you combine the benefits of whole life and term insurance, you have a product referred to as universal life insurance. This plan offers many traditional advantages of whole life insurance (such as protection for life), but also offers flexibility. Coverage amounts and premium payments are flexible to help meet changing needs during an insured person’s lifetime).

When you buy life insurance, you buy a promise of protection against financial loss caused by death. The promise is only as good as the company that stands behind it. In today’s marketplace, life insurance buyers should be concerned about both the financial strength of the insurer as well as the level of customer service the company provides.

Life insurance can be the foundation of a sound financial plan, especially given the continuing need after the death of a breadwinner. Think of it as a safety net should a wage earner die unexpectedly. In addition to that, permanent life insurance may accumulate a cash value that can be accessed while you are still living. While any loans from a policy will accrue interest and diminish the cash value and any death benefit, the proceeds could be used for any number of reasons.

Life insurance can be one of the most important purchases you make. Take some time during Life Insurance Awareness Month to examine your life insurance needs.

Wayne Scroggins, president and owner of Scroggins Insurance Agency in Bradenton, can be reached at (941) 795-1500 or wayne@ waynescroggins.com.

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