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HOME > LIFE INSURANCEWednesday, August 15, 2018

Life Insurance

 

Determining the type of insurance you need

Term Insurance

The most cost effective method of insuring many short-term (temporary) needs. This type generally offers the larger death benefit amounts for lower cost, but does not build any cash value. It pays a death benefit only if you die within the specified term. The cost generally remains the same for the entire period and is available for 10,15, 20 and 30 years. Some policies contain a conversion option if you want a permanent policy in the future.

Permanent Insurance

Designed to cover needs that last for your entire life. Whole Life and Universal Life permanent policies are suited to meet the final expenses, estate taxes, or retirement savings protection goals you have. They cover your entire life while accruing a cash value or savings. Premiums for these policies are generally higher, but accrue as cash value that may be used in several ways. You can take a loan against the value but if not paid back it will be taken from the final death benefit or cash value amount if you chose to stop making payments and withdrawal the account value. You can also use cash value to keep insurance for a limited time or buy a reduced amount without having to pay additional premiums. The more you pay in the earlier years, the more cash value you build in the account.

Types of Permanent Insurance:

Whole Life Insurance - Premiums remain stable and are paid for your entire life. The policy covers you as long as your premiums are paid. Premiums are higher than term insurance in the beginning, but build cash value and are smaller than the premiums you would eventually pay if you were to keep renewing a term policy in later years.

Universal Life Insurance - This policy is more flexible with the premium payments. You can also adjust the face amounts. Larger amounts may require proof to allow more insurance coverage. Premiums are put into an account that earns interest. Charges are deducted from this account. If the account keeps dropping, your coverage could end. You can also build more cash value by paying additional premium to the account.

Your agent will provide an illustration with the current interest rates and the current guaranteed minimum interest rate for you to review, understand, and sign. This will project values for the policy and face amount you choose. Your agent or company should be able to provide a year-by-year display of the account performance for you to review and adjust future premium deposits if you choose.

Other types of Life Insurance available are:

 

Group Term Life Insurance - This is a plan that is usually paid 100% by the employer for the benefit of all of the employees. This is an annually renewable term policy providing a guaranteed death benefit. This provides basic coverage, but supplemental amounts can be paid and added by the employee (subject to maximum allowable limits.) These policies include such items as: waiver of premium rider to pay in the event the employee is disabled and the ability to convert the policy by the employee if terminated. The employee can also add dependants coverage and accidental death and dismemberment coverage.

Lifeworks - This is a voluntary payroll deduction program offered by Erie Family Life. This is offered as either Whole Life or a 15 year Convertible Term Life policy. This is a nice benefit for employees without additional cost to the employer. The employee can add spouse and dependant coverage to this plan for additional cost. Automatically included is the waiver of premium in the event of disability of the employee and it can be continued in force if the employee leaves for another job.

Business Life Insurance - Policies can be written to satisfy business obligations. They can be set up for Key Persons or Buy-Sell Agreements. This will aid in the event of an untimely passing of a business partner or owner.