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Yes, you need life insurance...

If someone else depends on your income right now, it’s time to look into buying life insurance.

Life insurance can be the foundation of your financial security and can provide comfort and stability for your family. The purpose of life insurance is to help provide your loved ones with financial protection after you die, in exchange for the premiums you pay to your insurer during your lifetime. Some life insurance policies can provide you with financial protection for a specific duration, while others accumulate cash value, offering a living benefit that can be used for any purpose such as to help supplement retirement income, funding for a child’s education, or cash for emergencies.1

Life insurance should and must be a part of your overall financial plan. At Baystate, our licensed insurance agents are in the business of looking out for your best interest. We won’t upsell you or convince you to purchase a policy you really don’t need. Insurance is about protection. Protecting your family is a no-brainer.

Should I buy term or whole life?

Term Life Insurance

Term life insurance provides coverage for a set period of time at a generally lower cost than permanent insurance. Many term life insurance products allow you to convert to a permanent policy, such as whole life insurance. The cost of insuring oneself increases over time, so it’s important to understand your short- and long-term needs for financial security when you select a policy.

Term insurance is great for young couples and families just starting out, or for folks who want the most bang for their buck. Term insurance is referred to as “pure” insurance and provides the greatest coverage for the lowest cost.

Permanent Life Insurance

Permanent life insurance provides you with financial protection for your entire life, as long as the policy remains in force. This type of insurance is typically more expensive than term, but it is customizable and can provide much greater benefits. Because of the flexibility permanent life insurance offers, there are several types of policies you can purchase.

Whole Life Insurance 

The benefits of whole life insurance include guaranteed fixed premiums, a guaranteed death benefit and guaranteed cash value growth. This means that with whole life insurance, your premiums never increase as long as they’re paid, and the policy has “living benefits,” which may enable you to access the cash value of the policy for any purpose while you’re alive.1 One thing to keep in mind when taking a distribution from a whole life insurance policy is that accessing the policy’s cash values will reduce the policy’s cash value and death benefit and increase the chance the policy will lapse.

Universal Life Insurance

Universal life insurance is known for its flexibility and provides lifetime death benefit protection. It offers options such as coverage amounts that may be increased or decreased, and premium flexibility. Flexible premiums mean that if you need to skip a payment or pay a smaller amount one month, your policy won't lapse as long as it has accumulated enough account value to meet the monthly deductions.

Variable Universal Life Insurance

Variable universal life introduces an investment component. With variable universal life, you can allocate net premiums and account values among divisions of a separate account and guaranteed principal account.2 You can direct a portion of your net premium payments to any of the investment options available through the separate account depending on the particular variable universal life product. Each investment option offers a different level of risk and growth potential. Like universal life, variable universal life also offers premium flexibility. You can add numerous riders (customizable benefits) to your policy, which are available for an additional premium.

Survivorship Life Insurance

Survivorship life insurance is a form of permanent life insurance that covers two people on one policy and pays a death benefit after both people on the policy have died. The cost for survivorship life insurance is usually lower than the cost of two individual policies.

Distributions under the policy (including cash dividends and partial/full surrenders) are not subject to taxation up to the amount paid into the policy (cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to a 10 percent tax penalty if the policyowner is under age 59½. Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.                                                                                                                                                                                                                                                                                               Guarantees are based on the claims paying ability of the issuing company or companies.

What about disability income insurance?

A sudden interruption of income—due to an extended period of sickness or injury—can have serious financial consequences for you and your family. If you’re one of the few, you may receive group disability benefits through your employer. However, you will need to make sure the benefits available through your group disability coverage are adequate for your needs. Group disability benefits are taxable if your employer pays the premiums, may be capped at a relatively low amount, and may not cover variable income such as bonuses or commissions.  As such, these benefits may not be enough to maintain your lifestyle or pay all your bills if you become too sick or injured to work.

An individual disability income insurance policy can help supplement your group long term disability benefits and protect a larger portion of your income. An individual disability income insurance policy you purchase on your own is fully portable, meaning you won't have to worry about losing coverage if you change jobs, and the benefits are generally paid are tax free if you are the premium payor.3 In addition, an individual disability income insurance policy is non-cancelable by the carrier (as long as the premiums are paid), and with a guaranteed renewable policy, your premiums will never change for the life of the policy.

The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. We are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Disability income insurance policies have exclusions and limitations.

Not sure which type of policy would be best for you and your family? The easiest way to get your questions answered is to book a consultation with one of our advisors. We’re here to help.

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