What Type of Life Insurance in Atlanta is Right for You?
by Cynthia Williams
Did you know that the wrong type of life insurance can do more damage to your financial plans than just about any other financial product today? So, the first and most important step you must take when purchasing life insurance is to decide between permanent, term or a combination of both.
Let’s look at each type of life insurance in Atlanta:
Permanent life policies (whole, variable and universal) offer a death benefit and build equity (referred to as “cash value”). You can get back at least some of, and often much more than, the amount you spent on your premium if you cash out the policy or have to borrow against it.
As you might expect, permanent life insurance premiums are more expensive than term premiums because some of the money goes toward the cash value. The longer the policy has been in force, the higher the cash value. This is because more money has been paid in, and the cash value has earned interest, dividends or both.
Therefore, think of choosing either permanent or term life insurance as you would think of renting versus owning a home. With permanent life, you gain equity that can be saved for other purposes or passed on to your heirs.
On the other hand, term life policies only offer death benefits. If you die, you win so to speak. If you live past the length of the policy, you or, more specifically, your family members get no money back. The key is the length of time that you plan to keep the policy. If the answer is less than 10 years, term is clearly the solution.
Not only should you consider which type of life insurance is right for you, you need to determine how much is right for you. There are some guidelines you can follow. Our insurance consultants can perform a Capital Needs Analysis. This is a fancy term for figuring out exactly how much life insurance you should have. The more you can provide about your current financial situation, the more accurate your results will be. If you don’t know something specific, use the best-guess estimate. For instance, you may be uncertain about your future earning potential if you are young and just beginning your career. Use some reasonable estimates. If you are 30 years old with an annual income of $45,000 and retirement age of 65:
35 years X $45,000 = $1,575,000
Do some homework now, and see what the earning potential for your chosen profession is at 10 years’ experience, 20 years, 30 years. Come up with an average based on the escalated amount. If you stick with the calculation shown, yet retire at an annual income of $150,000, your estimated insurance needs will be significantly too low. Of course, our life insurance consultants in Atlanta can help you with this too. Just call Risk & Insurance today at 404-459-5975.