Using Key Person Life Insurance to Secure Your Business

December 21, 2020 12:23 newlambertagency

You must be aware that a life insurance policy can provide the necessary financial protection to your dependents in the event of your death.

But do you know that a term life insurance policy can also help to keep the company running smoothly in the event of the death of a key member of your leadership team?

Such a life insurance policy is called key person life insurance or key person insurance and it can provide an income tax–free death benefit when they’re needed most during transitions in your company.

Key Person Insurance is a life insurance policy that a company purchases on a key executive’s life. The company is the beneficiary of the plan and pays the insurance policy premiums. This type of life insurance is also known as “key man insurance,” “key woman insurance” or “business life insurance.”

Who is a key person in your business?

If you’re a business owner, it’s natural that you care about all your employees and would want the best for them. But there are certain employees whose absence can affect your business operations directly.

This person might be handling the operations, managing your profits, or is a business partner. So for your company, this individual becomes the key person.

How key-person insurance works with a term life insurance policy

A key-person life insurance is a term life insurance policy that provides cash to meet outstanding debts and maintain business continuity.

As a company, you need to obtain the key employee’s written consent and follow the formalities necessary to approve the purchase of the key person life insurance policy.

In any case, the company or the business pays all the premiums and is the beneficiary of insurance on the key employee’s life.

Thus if the key employee dies, the company receives the policy benefits to cover losses and find and train a replacement.

After the business files a claim following the death of the key person, the life insurance carrier will pay the policy benefit income tax-free to the business.

Then the business can use the benefit to replace lost earnings, provide a financial cushion, recruit and hire a qualified replacement, make survivor income payments to the key person’s family, etc.

Death is unpredictable and you can’t be overly dependent on your current cash flow to sustain your business in the event of a key person’s death.

Buying key person life insurance means you’ll have the necessary financial assets available at crucial times. Thus consult an agent, do thorough online research, and apply for such a policy to put your mind at ease.

What To Do When Term Life Insurance Expires?

October 9, 2020 07:22 newlambertagency

When you buy a term life insurance policy, you purchase it for a set term. You pay the premium and your family gets the complete benefit in the event of your death.

But what happens when the policy expires?

Even if your term life policy is ending, you may still need some sort of insurance protection. Especially if you have house payments, have dependent children, or have major debts.

Here are some options for you to consider:

Buy another term life policy

If you’re reasonably healthy and still have some financial obligations, buying another term life insurance policy is the best option. But as you’ll be older now, you might have to pay a higher price. Though buying a shorter term such as for 5 or 10 years could help lower the cost.

There’s also the chance of getting a better life insurance rates than your former insurer, you just have to shop around. Just keep in mind that you’ll probably have to answer health questions and take a life insurance medical exam during the application process.

Take it year by year

If you’re not interested in buying a new term life insurance policy, you could opt for annual renewable term life insurance, where you decide each year whether to continue coverage or not. This is the best choice for people who have very few financial obligations.

However, the rates can jump quite a bit each year so there’s that. Alternatively, you can ask your agent if you can extend your current term policy one year at a time turning your policy into an annual renewable term life – it’s the best option for people with terminal medical conditions who need life insurance at any cost.

Convert your term policy to permanent life insurance

It is well known that term life insurance is the best choice for many people, permanent life insurance does have certain advantages. Although it costs much more than term life, permanent life insurance lasts for the rest of your life – it includes whole, universal, and variable life insurance.

Your insurance provider may offer the option to convert your term life to a permanent life insurance policy — without taking a new medical exam or answering health questions again.

Most carriers allow you to convert term life to whole life insurance, which has a fixed premium, the investment return, and death benefit. While some may allow conversion to universal life, which offers flexible premium payments and permits changes to the benefit amount. It all depends on your insurance provider.

Although there’d be a deadline for conversion and age cut off, usually 75.

Be sure to browse around or consult an agent to better understand your next step.

Understanding Level Term Life Insurance

September 23, 2020 04:00 newlambertagency

Term life insurance is the simplest form of life insurance. It is affordable and straightforward. You pay regular premiums, and if you die over the course of the term a death benefit is paid out to your loved ones. If you outlive the term, the policy expires and you stop paying.

There are different versions of term life insurance. However, people buying term life insurance are buying level term life insurance, an important distinction that guarantees you pay the same price for your policy no matter how long it’s active.

What is Level Term Life Insurance?

It is one of the most popular types of life insurance that offers you protection in the event of your demise within the term of the policy. Unlike decreasing term insurance, the amount paid as premium as well as the sum assured does not change over the course of the policy term.

That means regardless of whether you die in the 4th year or 24th year of your 30-year policy, your beneficiaries will get paid the same amount. That is why they’re also known as level benefit term life insurance.

The cost of premiums for level term life insurance varies from person to person and relies on a person’s well-being, age, and occupation. Thus you must keep up the premium payments to keep the policy coverage in place.

How do they work?

They follow the same basic process as other life insurance policies:

You chose a policy, along with a death benefit amount and term period. The cost of a term life insurance policy is determined by these, as well as the applicant’s health and age. The premiums can be paid monthly or annually.

If you or the insured person dies during the policy term, the death benefit is paid out to the named beneficiaries. If the policyholder outlives the policy, the policy expires and they don’t have to pay the premium anymore.

The terms typically last anywhere between 10 to 30 years.

Benefits of level term life insurance

Level term life insurance has its perks. When you take out a level term life insurance policy, you’ll set a term at the beginning, usually around 25 years, as well as a pay-out size. This pay-out will be the same whether you die at the beginning or end of the policy term.

Thus, it can be said that predictability is the main benefit this policy offers as you’ll know how much you’ll be leaving to your beneficiaries no matter when you die, as long as you don’t outlive your policy.

This policy also makes budgeting easy since the amount you pay for your coverage throughout the policy will remain the same. And since you’ll be paying the same amount and receiving the same coverage throughout the life of the policy, you can get 10, 20, or even more than 30 years of coverage based on your current age.

Such benefits are what make level term life insurance so popular.

Do I Need Life Insurance If I Have a Pension

August 24, 2020 11:38 newlambertagency

People often go for life insurance when they’re in their early 30s. It seems to be the ideal time as they have their whole life ahead of them and naturally, anyone would want to feel secure. But what about the people on the other spectrum? People who have retired, their children are grown and are settled. They have put together a reasonably solid income plan with Social Security, pensions, and annuities supplemented by investments and retirement accounts. They often wonder, do I need life insurance if I have a pension?

Well, first of all, life insurance is intended to help the beneficiaries cope with the expenses incurred from the loss of a loved one. And life as we know it is unpredictable. It’s important to be ready for anything that life throws at us and life insurance could be the answer to that.

Life insurance safeguards you from any hardships of financial loss and the primary concern is the loss of income. So if your family remains secure after your passing and they don’t experience any financial loss with the support then logically there’s no need for life insurance.

But what if that’s not the case?

Do you need life insurance?

You need to ask yourself, Will someone experience a financial loss when you die? If the answer is no, then you don’t need life insurance. For instance, let’s say you have a steady source of retirement income from investments and pensions and you’ve chosen an option that pays 100% to your surviving spouse. Then your death wouldn’t have any effect on their income.

Do you want life insurance?

Even if there will be no substantial financial loss experienced upon your death, you may like the idea of paying a premium now so that family, or a favourite charity, will benefit from your death. Life insurance provides you with an option to leave a substantial amount to a charitable cause, children, grandchildren, nieces, or nephews. So life insurance after retiring could be a great way to spread happiness.

Situations Where Life Insurance Is Needed

Everyone has a unique situation regarding their finances but below are some considerations for continuing life insurance policies:

  • Retirees who will lose a substantial portion of the family income when one spouse dies
  • Families or couples in their peak earning years that are saving for retirement
  • Parents whose children are not adults
  • Business owners or business partners, and employees employed by small businesses
  • Families with a large estate that is subjected to estate tax

 

Simply put, for people that have substantial financial support regardless of any loss of income, life insurance after retiring might not seem like a necessity. But for people who like to go the extra mile for protecting their families, life insurance is the right step.

Is Whole Life Insurance Worth It?

August 10, 2020 13:40 newlambertagency

In your otherwise busy lifestyle, there comes a time when you wonder about taking an insurance policy- it could be to safeguard your family or just to have a secure retirement plan. But when you sit down to Google about a policy that’ll offer the protection you desire, you’re immediately bombarded with terms you may not understand.

There is more than one type of insurance policy so naturally, it results in confusion. But if you find yourself wondering about Whole Life insurance, then we may be able to guide you and put an end to your confusion.

What is a Whole Life insurance policy?

Whole life insurance is a type of permanent life insurance, which means the insured person is covered for the duration of their life as long as premiums are paid on time. Permanent life insurance is different than term life insurance, which covers the insured person for a set amount of time (usually between 10 and 30 years).

Whole life insurance is the most common type of permanent life insurance policy that people purchase. They also cost more because they include an extra savings component, which is referred to as the “cash value”, which brings us to the next question, is whole life insurance worth it? Read on.

How do they work?

There are 3 major components of a Whole Life insurance policy:

Death Benefit: As the name suggests, the death benefit is a tax-free amount of cash which is paid out by the insurance company after you die. For instance, let’s say you bought a whole life insurance policy with $100,000 in coverage, then that $100,000 becomes the death benefit.

Beneficiary: A person that receives the death benefit is the beneficiary. Anyone can be your beneficiary- be it a spouse, children, a business partner, a friend, trust or organization etc.

Premiums: The amount of money you pay for your whole life insurance policy – payment could be made monthly or annually.

As the name implies, a Whole Life insurance policy lasts for your life as long as the premiums are being paid on time. That means if you buy it when you’re 30 and continue paying your premiums until you die, your family will receive the death benefit.

How does cash value work?

Cash value is your ideal volatility buffer for uncertain economic times and financial emergencies. That means a whole life policy can serve as a source of emergency funds for you if something goes wrong, or you may be able to take out a loan against the policy.

Over time, the cash value of your policy increases, and you may have the option to withdraw funds or borrow against it. The rules on how and when you can do this differ from company to company and the policies they offer.

The cash value of a policy earns interest and grows over time. Life insurance companies often guarantee a certain amount of growth every year and that is why people flocked to buy whole life insurance following the 2008 recession.

Hope the above information answers your burning question – is whole life insurance worth it?

You can always consult an agent for guidance and choose a policy that suits you the best.

Steps to Buying Whole Life Insurance

July 21, 2020 11:37 newlambertagency

We as humans love to plan everything. We love the comfort of a pre-planned schedule and we derive comfort from the idea of an ideal future. But even as we’re busy making plans for our lives there always comes a time when we think about life insurance – whether it’s the right time? Which type of insurance is beneficial? What exactly is whole life insurance?

Well, you’re not alone! But as you mull over all the options you’ll find that when it comes to buying whole life insurance, you’ll need some assistance.

Not to worry as we have curated a detailed list of steps to follow when going for whole life insurance.

What is whole life insurance?

Before you decide to settle on whole life insurance coverage, you need to know what exactly does it stand for. Whole life insurance is a type of permanent life insurance (also called cash value life insurance), which is one of the two major categories of life insurance the second major being term life insurance.

The biggest difference between these two categories is that term life insurance ends after a set number of years; it offers a death benefit and nothing more. Permanent policies like whole life insurance, on the other hand, cost more because they include an extra savings component, which is referred to as the “cash value.”

Choosing the right company

There are a plethora of companies that sell whole life insurance. While some are better than others, each one will appear to have something unique to offer.

You must begin by filtering out the clutter to make a list of companies that you deem to be appealing and then compare the pros and cons to make a final decision.

When comparing companies, the details could be daunting but their financial strength rating should be your top priority – this shows here the company stands at present.

You need to also find out what the dividend payout is and whether the policy will accumulate a cash value.

Asking the right questions

Even if you skimmed through the list of various companies to select the right one for you, you must ask the right questions. The last thing you want to do is purchase a policy without being sure of the whole life insurance benefits.

Prepare a set of questions beforehand when you set up a meeting with the insurance provider – this will help you make the right choice.

Get illustrations

After landing on the preferred company, it’s time to layout the final details of buying a policy. You can decide on a policy by analyzing your personal needs and budget.

However, you need to be aware that the final price could change based on your medical exam.

You need to have a clear agenda on what will happen next. From there, review each step for potential roadblocks. For example, you may realize that a medical exam could turn up that you’re a smoker and that could result in an increased premium.

Activate your policy

After going through the tedious process, it’s finally the time to activate your whole life insurance. Make sure you receive the details of the policy one final time before you make the purchase.

Carefully go through the details such as the coverage, including the death benefit, as well as the premium. It’s alright to not move forward if you’re unsure about something and need assistance from the agent.

The last step is making your first payment. Speak with your company about your options for making payment – online, credit card, over the phone, check. Choose as per your preference.

Buying whole life insurance can seem overwhelming and that’s why you need to remember communication is key. You’re entitled to ask about any minute detail that seems to be clouding your judgment and get it cleared from your agent.

Hope the aforementioned steps help you find the right company and policy that makes you worry about the future a little lesser.

Does Life Insurance Cover Deaths From Coronavirus?

June 26, 2020 12:10 newlambertagency

The world is facing a crisis. And naturally, several rules have been changed. Our priorities are rearranged and our focus has been shifted to all things ‘essential’. It is reasonable to assume that a global health crisis like the coronavirus would have some impact on your life insurance coverage policy acceptance and premiums.

As the virus spread to all corners of the world, the death toll has risen significantly. So, now the question arises, will a life insurance cover coronavirus? Also, will you be able to get a life insurance policy after contracting the virus?

Read on to find out…

Existing life insurance

Let’s consider an existing life insurance policy that the policy-holder has had before the pandemic hit. If that individual passes away because of COVID-19, they are eligible for the death benefit. In such a case, the beneficiary of the policy-holder will receive the sum assured as the death benefit.

Furthermore, even though some life insurance policies exclude specific causes of death, death due to coronavirus is without a doubt applicable to the death benefit.

Death benefit includes the agreed amount of money, called the sum assured, which is paid by the insurance provider upon the death of the policyholder to the beneficiary.

New life insurance

Now let’s consider a new policy taken amidst the crisis. If you have considered buying life insurance, then you must bear in mind that your insurance premium is determined based on your health and medical history, and purchasing it amidst this global health crisis is bound to have an impact on both the acceptance of your policy application and the cost of its premium.

But there’s a catch here. If you have already contracted the virus and then decide to take up life insurance, your life insurance application will probably get rejected by the insurance provider.

However, if you disclose your medical history precisely at the time of your purchase, wherein you are not infected with coronavirus, then your application will most definitely be accepted. This allows your death benefit to be payable to your beneficiary in the future even if you pass away due to coronavirus infection.

Hence you must be vigilant and upfront when taking up a new policy.

You must bear in mind that even though COVID-19 is covered as a critical illness, benefits will be paid out as per your policy’s terms and conditions only. For example, a policy may state that the critical illness benefit will not be applicable if the illness is caused by any of the listed conditions, and death has occurred within the 30 days of its diagnosis.

It all depends on the kind of policy you take and the kind of provider that you decide to put your faith and money in.

And as for people who are wondering if they should buy life insurance during a pandemic like COVID-19, the short and easy answer to it is yes. In fact, one must not wait for a global health crisis to instate to take necessary financial protection for you and your family. A pandemic doesn’t mean end times. And if your life insurance cover COVID19, you save yourself from unnecessary panic and worry that is often accompanied by such a crisis.