When considering the top ten questions about life insurance, how much is typically ranked in the top five. What life insurance is and what it does is the first thing the consumer should consider when attempting to purchase a policy.
In many cases, realtors who purchase life insurance do so because they want their income to be replaced in the event of their death, but there are other financial issues to consider as well.
Replacement of Living Expenses
For most families, even if both spouses are generating a significant and steady income stream, if one spouse dies, the surviving spouse is unlikely to continue comfortably meeting the monthly family expenses. This situation should be motivation enough to purchase life insurance for both earners in the family.
Replacement of Retirement Contributions
Like most other professionals, realtors are concerned about building a retirement portfolio to secure the funds needed for a comfortable retirement and typically invest into retirement accounts on a regular basis. Should an earner in the household die unexpectedly, the lost investment dollars can be replaced using a portion of the death benefit, thereby providing a comfortable retirement account for the surviving spouse.
Your death benefit should always take into consideration paying off the mortgage on a family home. When you take the necessary step to ensure that your surviving loved ones will be able to continue living in a home without the concern for mortgage payments, you will enjoy significant peace of mind knowing that your family will be able to stay in the home where memories are attached.
With the cost of college tuition skyrocketing, it’s critical that a portion of your death benefit replaces funds that would normally be available for a 529 plan or other tuition saving plan. Certainly, your children will be at an advantage when they enter the workplace by having a degree from a university.
Most realtors, especially those new in the business, carry substantial credit card debt that will likely be passed on to a spouse in the event of your death. Knowing this, realtors who are purchasing life insurance to meet the financial needs of the family should consider their total indebtedness when calculating the death benefit of their life insurance.
Financial Needs Analysis
When a realtor is attempting to determine how much life insurance to purchase and anticipating the cost, a financial needs analysis calculator can be found online to help determine your benefit needs. An in-depth calculator can be found here or you can simply rely on your insurance broker to help with the process. After determining your death benefit, you can easily receive a quote indication from Realtor Life Insurance and get a good idea of what your insurance program is going to cost.
Term Insurance Family Plan
Term insurance is probably the most economical way to create a family life insurance plan because of the various riders that are available with your policy.
- Additional Insured Rider
The additional insured rider allows the applicant to add their spouse or another family member to the policy and provide insurance coverage up to the face amount (death benefit) of the named insured on the policy. If the policy being purchased has a conversion privilege (most term policies do), it will be available for the additional insured as well.
- Child Protection Rider
Certainly, no parent wants to consider the death of a child, but it happens. Although the family isn’t affected as much financially when a child dies, there are significant costs related to having a funeral and burial. In today’s economy, the average cost of a moderately priced traditional funeral is about $8,000. These costs can easily be covered by adding a child term rider which costs very little and covers all minor children in the household. Typically purchased in units of $1,000 or $2,000, adding five units to your policy will generally cost only about five dollars per month.
By discussing and taking advantage of the various riders available with term life insurance, your insurance agent can help you design a very affordable life insurance plan that will cover the entire family.
Other Term Insurance Riders to Consider
Waiver of Premium
Probably, the only thing worse than not having life insurance when you need it is to lose a policy that you’ve paid into for many years because you’ve become disabled and unable to work. The Waiver of Premium rider provides for the insurance company to waive premiums due on your policy should you become totally disabled.
Disability Income Rider
The Disability Income rider allows the insured to receive an income stream in the event they become disabled and cannot work. Although this rider doesn’t provide 100% of your lost income, it will likely help to prevent the policyholder from losing their home while they are waiting for other disability benefits, such as social security, to be approved and payments to begin.
Guaranteed Insurability Rider
Knowing that there may be life events that will require you to purchase additional life insurance, the Guaranteed Insurability rider allows the policyholder to purchase additional coverage at regular intervals without having to prove insurability. This rider is most valuable for insureds that may require additional coverage, but have health issues that would disqualify them for coverage.
Term Conversion Rider
Since term insurance is not permanent coverage (guaranteed to stay in force until you die), there may come a time when a policyholder would want to convert all or a portion of the term policy to a permanent insurance such as whole life or universal life without having to prove insurability.
Accelerated Death Benefit Rider
Typically included on many policies today, the Accelerated Death Benefit rider is a living benefit. If an insured person on the policy is diagnosed with a terminal illness, the insurer will pay a portion of the death benefit to the policyholder to help meet the costs of life ending illnesses. The amount available will be spelled out in the policy and will generally have a cap.
Return of Premium
The Return of Premium rider allows for the insurer to return all premiums paid for the insurance policy to be returned to the policyholder if they outlive the term of the policy.
Since the lump-sum payment is considered a return of post-tax dollars, the money is paid on a tax-free basis.