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Back to the Basics: Life Insurance

Carney Insurance Services

Not sure if and when you will need Life Insurance? Here’s a quick read to clear the air.

LIFE INSURANCE PROCEEDS CAN BE USED FOR:

FAMILY NEEDS

• Replace lost income due to the death of a wage earner

• Create an education fund

 • Provide for children of a prior marriage or help satisfy force share of a surviving spouse

• Satisfy divorce-related obligations such as alimony or child support

• Create a fund to provide care for a loved one with special needs

• Pay off a car loan, credit cards, and other debt obligations

• Pay off or reduce a home mortgage

• Pay burial and other final expenses

Use certain types of life insurance as a tax qualified alternative to long term care costs.

BUSINESS NEEDS 

 • Collateralize a business loan, pay off loan, and obligations

• Fund a buy-sell agreement-funds flow tax free to survivors of deceased partner, while allowing owners to maintain business, and clean up “ownership” issues

• Stabilize a business at the death of a key employee or owner

• Fund a bonus to retain key employees at the death of a business owner

• Offset losses to a business caused by the death of a key employee

• Establish a fund to retain key employees

WHAT KIND OF LIFE INSURANCE SHOULD I BUY?

Term Insurance-Term life insurance provides protection for a specific period of time—the “term”—and is designed for temporary circumstances. It makes the most sense when your need for coverage will disappear at some point, such as mortgage, debt, or when your children graduate from college.

Permanent Insurance-Permanent insurance offers lifelong protection, and you can accumulate cash value on a tax-deferred basis. This cash account can be used for a variety of purposes, from helping you out of a tight financial spot, to providing funds to take advantage of an opportunity, to supplementing your retirement income.   Permanent insurance falls into two main categories.  

Whole life is the simplest and most common option, with lifetime coverage.  Premiums are fixed, cash values maybe generated. There are numerous products that can meet your needs.

Universal life offers the flexibility of varying the amount of your premium payments and even your face amount.  Cash values maybe generated.   It also offers the certainty of a guaranteed minimum death benefit as long as your premiums are sufficient to sustain it.

HOW MUCH LIFE INSURANCE DO I NEED?

Generally speaking, a basic guide has been to carry 7-10X’s  your income.  Example-income of $60,000=$420,000-$600,000 need for a basic life insurance.  Add coverage to pay off any mortgage, consumer debt, and final expenses and on-going income needs to replace your income.  Example-

I would like to replace (xx%) of my (income) for (xx) amount of years.   Client would like to replace 75% of his income (currently $60,000) until his youngest child (currently age 10) graduates from college (assume 15 years).  $60,000 X 75% = $45,000 X 15 years= $675,000, need to add to clients’ plan. 

A Professional insurance agent has additional tools to assist in developing a solid insurance plan both in the short term, as well as long term.

Marti Schochenmaier is Carney’s Life & Health Specialist!

He has years of experience and expertise in the industry and is happy to answer any questions you have and find a great policy that’s personalized just for you.

If you would like to learn more or get a free quote, don’t hesitate to reach out. Call, email or even stop into our office!

(651)204-0432

[email protected]

944 Lake Street South

Forest lake, MN 55025