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Income Replacement Term Insurance Offers Lower Premium For Same Face Amounts

By: Christopher Beard

Every day we are bombarded with the news regarding the current economy and its affects reverberating throughout the nation. Job layoffs and a decline in new jobs being offered bring to reality just how quickly everything we know can change and leave us wondering how we can plan for the future. If that were not enough now we have people fearful of a pandemic that can end a life because they caught the flu. Obviously there are little guarantees in life and it can be difficult to look further than right now when it come to planning for the future. According to a LIMRA research study 56% of married families believes they are under insured and I imagine many are not placing it at the top of the list, yet now more than ever is a time to review your coverage. Insurance companies realize these are difficult times and are always designing a new form of coverage that will allow a family to protect their family even in the midst of a recession. Once recent insurance design is being referred to as income replacement insurance, which is a little different from traditional life insurance plans. Traditional plans usually provide a lump sum death benefit that goes to the chosen beneficiary such as the spouse and covers mortgage loans, auto, credit cards, and student education and can go quickly and many times falls short of meeting every intention.

Introduction of the Income Replacement Term Policy

What if there were a policy that would bear the burden of both your families immediate and long-term expenses in the event of a death of a family income provider and simultaneously reduce the out of pocket cost in today’s current financially difficult times. In comes the recent term life insurance introduction that provides for families to purchase a death benefit face amount that is paid out over a certain number of years 5,10,15.20,30 rather than in a lump sum at an evident discount over a straight lump sum benefit policy. Technically you could back your benefit out of what you could afford in premium.

By breaking it down a insured purchases a $300,000 Term Life Policy with level premiums over 20 years then at death the beneficiaries receive that benefit in a payout over 20 years resulting in a 15-30% savings in premium in comparison to the same face amount of coverage paid in a lump sum payout. Even more spectacular you can add a lump sum rider to the income replacement policy to cover big expenses like a mortgage if you so choose and convert the policy prior to age 75 to a universal life policy without additional underwriting. I think we will see a lot of consumers reviewing this plan and purchasing a lump sum rider for half the total face amount and taking a payout on the second half to save the premium. Should the spouse also pass away the contingent beneficiaries will receive the remaining payout on the policy.

Example:
Male 39 Years Standard Health $600,000 Lump Sum Benefit
Premium $798.00Annual / $69.83 Mo

Same Male 39 Years Standard Health $300,000 20 Year Payout
Plus a $300,000 Lump Sum Rider
Premium $638.40 Annual / $55.86Mo

This could equate to a savings of approximately $159.60 annually for essentially the same coverage. Keep in mind that you choose if you want to add a rider and you choose the payout period. Shorter payouts will result in smaller savings and also be aware that tax laws will affect a portion of that payout taken as an income stream. If you consider using one of these you may want to consult a tax attorney to clarify the taxed portion taken on amount you select as income. Also to be noted there are limitations on the rider face amount in relation to the value to the payout portion if you choose to add one. This income replacement insurance can definitely be of value when determining cost, and a families protection needs since many that have life insurance rarely have enough and of course the possibility that the benefit will not go as far as expected.

Article Source: http://www.kravities.com

Christopher Beard is a virtual agent who uses automation to simplify the consumer buying experience He is the president of Trinity 1 Financial Group and works with clients planning mortgages, investments and insurance strategies visit his site www.gotermquote.com www.Trinity1FinancialGroup.com www.gohealthquotes.com

Tags: Florida, California, Georgia Term Life Insurance, Lower Premiums, Income Replacement Insurance

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