4-Step Guide to Life Insurance

Transcription

1 TIAA-CREF Life Insurance Company 4-Step Guide to Life Insurance Our promise to help you protect what matters most

2 At TIAA-CREF, we understand the need for life insurance our promise is to help you make the right choice. Chances are you may already have some life insurance either through your employer or an individual policy you bought in the past. But are you sure you have enough? If you ve had a big change in your life since you last bought insurance marriage, a new baby, buying a new home or a child getting ready for college you might need more coverage. TIAA-CREF Life Insurance Company (TIAA-CREF Life) can help you decide what policy type and amount are appropriate for you and your family. We have a wide variety of quality life insurance products to help protect you and your family, no matter what stage of life you re in or how your needs might change over time. Using this guide This guide takes you through the four easy steps to finding and maintaining the right coverage for you and your family: Step 1 Learn why and when you need life insurance. Step 2 Step 3 Step 4 Determine how much coverage you need. Decide which type of life insurance to buy. Review your life insurance coverage periodically. Call a TIAA-CREF Life Insurance Representative 1 today for more details Call weekdays between 8 a.m. and 8 p.m. (ET). Life insurance can help you keep your promises. 1 All solicitations pertaining to a contract for insurance may only be handled by an agent or broker licensed to engage in the business of insurance in the state in which you reside. 2 4-Step Guide to Life Insurance 4-Step Guide to Life Insurance 1

3 Step 1 Learn why and when you need life insurance. Simply put, life insurance gives your family or business greater peace of mind after you die. It s money they can use to help pay the mortgage, run the household, maintain the lifestyle you ve worked so hard to provide or help transition your business. It can also help ensure that your family or business partner won t be burdened with debt. Without enough life insurance, assets like your home or business might have to be sold to pay outstanding bills. It s important to think about life insurance when you experience major milestones. Check all that apply to you: n getting married, divorced or remarried n starting a family n taking on a new or bigger mortgage n managing substantial student loans n changing jobs n preparing for retirement n taking care of family members with special needs n caring for an aging parent The importance of life insurance While it is easy to procrastinate when it comes to buying insurance, we never know what the future holds for us. So it s important that we have sufficient insurance in place at all times in case the unthinkable happens. How life insurance works When you buy a life insurance policy, regardless of the type of policy, the foundation of every life insurance policy works this way. 1. The insurance company agrees to pay your beneficiaries a specified amount of money when the insured person dies, as defined by the policy. 2. You pay for the policy by making premium payments. The premiums you pay depend on your age, gender, health and lifestyle, the kind of insurance you buy, and any extra features and riders you add to the policy. 3. Your beneficiaries generally won t have to pay income tax on the money they receive from your insurance policy according to current IRS regulations (see IRC Section 101(a)). A key benefit of life insurance is its tax-advantaged death benefit. n saving for your children s or grandchildren s education n getting a raise n planning your estate n starting or growing a business Life insurance policies contain exclusions, limitations, reductions of benefits and terms for keeping them in force. A life insurance representative can provide you with costs and complete details. If you checked one or more boxes above, you may need more life insurance. Any one of these life events can trigger the need for additional life insurance. Even if you already have some insurance, there s a good chance you might not have enough or the right kind. And that means the people who matter most to you could suffer financially if something unexpectedly happens to you. 40 percent of American households are immediately unable to pay their bills when they lose their primary breadwinner. 2 2 LIMRA Facts About Life Step Guide to Life Insurance 4-Step Guide to Life Insurance 5

4 Step 2 Determine how much coverage you need. Depending on your personal situation, both you and your spouse or partner may each need life insurance equal to at least 10 times your annual salaries. This amount can help your family: Pay your final bills and cover their daily expenses for a few years Set up reserve funds for emergencies or for college If you have other long-term needs, higher amounts of protection may be more appropriate. Protecting your spouse or partner is important. Even if your spouse or partner doesn t work full-time, it s important that they own an adequate amount of life insurance protection. Their income may not be substantial, but their contribution to your household is significant. Imagine if you had to hire someone to handle all of those responsibilities. It s been estimated it would cost over $112,962 a year to hire someone to do all the tasks a stay-at-home spouse manages. 3 To get a quick idea of how much coverage you and your spouse or partner may need, complete the worksheet below. For a more in-depth analysis, complete the worksheet on page 6 or use our interactive calculator at A quick estimate: Enter your gross annual income. For you For your spouse or partner $ $ Multiply by 10 x10 $ x10 $ Subtract any existing individual or group life insurance protection. Suggested coverage amount: $ $ $ $ I promise to give you a safe home. Common expenses and costs When calculating how much life insurance you need, remember to cover future expenses and set up sufficient funds for college or loan repayments. Use the following information to help you accurately complete the detailed estimate on page 6. Funeral expenses A typical funeral costs an average of $7,000 to $10,000, depending on your local funeral service cost and the type of burial service you choose. Source: Funeral-Tips.com. Funeral Saver s Kit Accessed 24 August 2012 Probate costs Estate probate and administration costs are usually about 2% to 7% of the total estate value. The exact amount depends on how complex your estate is and where you live. Source: How Much Does Probate Cost? costhelper.com probate. Accessed 24 August 2012 Standard of living In general, your family may need about 75% of your total family income to maintain its standard of living. This figure assumes your mortgage has been paid off. If it hasn t, you ll need to use a higher percentage. College costs The average annual cost of a four-year college education can range from $22,261 at a public institution to $43,289 at a private institution. These ranges are based on average annual costs for and include tuition, room and board, books, and incidentals. Source: Trends in College Pricing 2013, The College Board, New York, NY. 3 Gouveia, Aaron. What s a Mom Worth in Salary.com Accessed 22 June Step Guide to Life Insurance 4-Step Guide to Life Insurance 7

5 A more detailed estimate It may make sense for you to complete this more detailed estimate if you own multiple assets as well as other insurance policies. This estimate takes into account what you have now, how much you owe and how much your dependents will need when you die. To complete this worksheet, you ll need to refer to your latest financial statements. For a personal needs analysis, please contact one of our Life Insurance Representatives at What you have now (A) Bank accounts + $ Taxable investments and savings, other than your home and other real estate + $ Real estate you own other than your primary residence + $ Individual life insurance policies + $ Group life insurance policies + $ Total of what you have now = A $ Do you have enough life insurance? After you ve completed the detailed estimate, complete the calculation below to learn if you have enough life insurance or if you may need more. Your totals from page 6 Total of what your dependents may need (B) B $ Total of what you have now (A) - A $ How much estimated life insurance you need (B-A) = C $ If C is positive, you may need more life insurance. If C is negative and your estimates are realistic, your dependents may be able to manage without additional life insurance. What your dependents may need (B) Debt and expenses due at your death Funeral and burial expenses + $ Final income taxes + $ Estate probate and administration costs + $ Mortgages and loans not covered by insurance + $ Credit card debt + $ Subtotal $ Living expenses 75% of your total family income (before tax) x the number of years your dependents will need it + $ Emergency Fund (3 to 6 months of income) + $ Children s education Average annual potential cost x average number of years in college x number of children + $ Total of what your dependents may need = B $ I promise to be loyal. 8 4-Step Guide to Life Insurance 4-Step Guide to Life Insurance 9

6 Step 3 Decide which type of life insurance to buy. There are two basic kinds of life insurance: Term insurance Permanent insurance simple, affordable coverage you buy for a set period of time combines lifetime coverage with the potential for cash value accumulation Understanding the differences Choosing between term and permanent insurance can be compared to the difference between renting and buying a home. Term insurance is like renting a home. Term insurance is a good choice if you need protection for the shorter term or have limited resources to pay for coverage. Monthly premiums are usually lower, but some policies can increase in cost as time goes on. Like renting, with term life insurance you don t build up any equity or cash value when the policy term ends, so does your coverage. Permanent insurance is like buying a home. When you buy your home, your monthly costs may be higher than renting, but your mortgage payments help you build equity over time. Likewise, permanent life insurance provides you with long-term protection. Premiums are usually higher than they are for term insurance, but potentially build cash value funds you can easily access by making withdrawals or taking out a loan. 4 (Certain restrictions may apply.) A general rule of thumb The longer you need life insurance protection, the better value permanent insurance can be. If you need protection for the shorter term, term insurance may be a better choice. Deciding between term and permanent life insurance The right kind of insurance for you will depend on why and for how long you need insurance. To help make this decision, ask yourself these questions: Why do I need life insurance? W How long do I need the protection? How much protection do I need? W How much can I afford to pay? Steps 1 and 2 helped you answer these questions. Use these answers as you review the differences between term and permanent insurance. Whether you select term or permanent coverage, life insurance is one of the most important steps you can take to help protect your family s financial future. 5 Protection Premiums Potential cash value Term For a specified period of time, typically 10, 20 or 30 years. Typically an initial lower cost than permanent insurance, with level premiums for that time period. Typically no opportunity for potential cash value. Permanent Access TIAA-CREF Life Insurance Company online resources for more information Call weekdays between 8 a.m. and 8 p.m. (ET) to speak with one of our Life Insurance Representatives. Designed to provide lifelong protection and often has cash value features. Often higher initial cost than term, but generally level premiums for life. Your net premiums have the potential to accumulate cash value and grow tax deferred. You have convenient access to your cash value through loans and withdrawals. 6 4 Partial withdrawals or outstanding loans and loan interest will reduce the policy s death benefit and may have tax consequences. If the policy is classified as a Modified Endowment Contract (MEC) under IRS rules, distributions are generally subject to income taxes and, if before age 59 1 /2, a federal tax penalty. Taxes may be incurred if the policy is allowed to lapse before maturity. 5 These are typical differences between term and permanent life insurance. The features and benefits of the policy you choose may differ based on the issuing company, product and other factors. 6 Certain limits or restrictions may apply Step Guide to Life Insurance 4-Step Guide to Life Insurance 11

7 Step 4 Review your life insurance coverage periodically. Life insurance coverage can best meet your needs when you review it regularly. Changes to your family, finances, employment or health may affect how much and what type of life insurance you need. Review your life insurance every one to two years or sooner if you have experienced one of these changes: Reevaluating your coverage: n Family Have you married, divorced or remarried? Did you welcome a new child to the family? Are you a single parent with children who depend on you? Did you lose a family member? n Finances Have you purchased a home? Are you saving or paying for college? Are you financially supporting a new baby, aging parent, adult children or a special needs child or grandchild? Do you have student loans or other substantial debt? n Employment Have you changed jobs? Have you started a business? I promise to be your guide. We stand behind our promise. TIAA-CREF Life has a wide variety of quality life insurance products to help protect you and your family, no matter what stage of life you re in or how your needs might change over time. Live more securely knowing you ve made a smart decision to help protect your loved ones with life insurance from TIAA-CREF Life: W W High ratings for financial strength. TIAA-CREF Life is one of the three highest rated insurance companies in terms of overall financial strength. 7 Top-rated customer service. 8 We re one of the top three companies in the life insurance category for customer satisfaction. 9 Personalized solutions. We can help you determine your life insurance needs and discuss your options. Our Life Insurance Representatives: Provide no-obligation guidance focused on your unique needs, Give easy-to-understand explanations, Can help you with the application process, Never pressure you to buy. Life insurance designed for your needs. Our entire lineup of life insurance policies offer flexible, affordably priced plans, to help provide the right protection for you and your family. n Health Has your health changed? Review your coverage today with our online resources or call for more information Call weekdays between 8 a.m. and 8 p.m. (ET) to speak with one of our Life Insurance Representatives. 7 TIAA-CREF Life Insurance Company (TIAA-CREF Life) is a wholly owned subsidiary of Teachers Insurance and Annuity Association of America (TIAA). TIAA-CREF Life holds the following ratings as a result of its relationship with TIAA: A.M. Best (A++ as of 9/14), Fitch (AAA as of 10/14), and Standard & Poor s (AA+ as of 10/14). It holds the second highest possible rating from Moody s Investors Service (Aa1 as of 10/14). Per S&P criteria, the downgrade of U.S. long-term government debt limits the highest rating of U.S. insurers to AA+ (the second highest rating available). There is no guarantee that current ratings will be maintained. Ratings represent a company s ability to meet policyholders obligations and claims and do not apply to variable annuities, mutual funds or any other product or service not fully backed by TIAA s claims-paying ability. 8 For the current financial strength ratings, please visit 9 Insure.com Insurance Fees, Revealed, March 30, 2012 The death benefit is a guarantee subject to the claims-paying ability of TIAA-CREF Life Insurance Company Step Guide to Life Insurance 4-Step Guide to Life Insurance 13

8 Live more securely now. Speak with one of our Life Insurance Representatives for complimentary, no obligation guidance. Call , Monday through Friday, 8 a.m. to 8 p.m. (ET) or visit or scan the code to learn more Step Guide to Life Insurance 4-Step Guide to Life Insurance 15

9 Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not bank deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value. Life insurance is underwritten by TIAA-CREF Life Insurance Company (TIAA-CREF Life), which is a wholly owned subsidiary of Teachers Insurance and Annuity Association of America (TIAA). Both TIAA and TIAA-CREF Life Insurance Company are headquartered at 730 Third Avenue, New York, NY Each of the foregoing is solely responsible for its own financial condition and contractual obligations TIAA-CREF Life Insurance Company (TIAA-CREF Life), 730 Third Avenue, New York, NY C20624A _ A13749 Generic (12/14)