Why buy life insurance?

Transcription

1 Why buy life insurance? Allianz Life Insurance Company of North America M-5173 Page 1 of 8

2 Discover the many benefits of life insurance Life insurance can be an important and versatile part of your overall financial strategy. Why consider life insurance? First and foremost, life insurance can provide financial reassurance for those you care about. Life insurance provides a death benefit and the knowledge that your loved ones (or business) will be able to carry on without you. But did you know that life insurance can provide living benefits, too? Once you ve determined that you need the death benefit, consider that some life insurance policies can also help you: Supplement your income in retirement Provide supplemental college funding Cope with a financial emergency Create a succession plan for a small business Other financial needs These are just a few of the reasons many people consider a life insurance policy to be an important part of an overall financial strategy. Is life insurance right for you? As you plan for your future, it s natural to wonder whether you need life insurance and if so, how much. This brochure provides some facts about life insurance that can help you make an informed decision. Over the next few pages, we ll answer four important questions: 1. Do you need life insurance? 2. Which type of policy might be a good fit for you? 3. How much insurance do you need? 4. Who are your beneficiaries? Then, we ll look at some of the additional uses of life insurance. You may be surprised to discover how versatile and valuable life insurance can be. Page 2 of 8

3 What you need to know about life insurance Do you need life insurance? If you have dependents, the answer is yes. Life insurance provides a death benefit for your loved ones, if the unexpected should occur. It can cover one-time expenses such as funeral arrangements, medical bills, and estate taxes. Life insurance can also provide income for your dependents for years to come. The more people who depend on your income children, a spouse, or elderly parents the more life insurance you re likely to need. In other cases, the answer may also be yes. Even if you don t have dependents, you could still benefit from adding life insurance to your overall financial strategy. First, the death benefit can be used to cover your final expenses. Additionally, some types of life insurance can provide the potential for cash value accumulation, which you may be able to access under certain circumstances through loans or withdrawals. 1 You can even use any accumulated cash value as supplemental income in retirement, supplemental college funding, or for other financial needs. And if you own a business, you may be surprised to discover that life insurance can play a valuable role in helping you reward and retain employees, reduce your tax liability, and protect the future of your business. Ask your agent for more details about how life insurance can be part of your business continuity strategy. Half of U.S. households (58 million) say they need more life insurance the highest level ever. One in four U.S. households rely only on group life insurance to provide financial protection if a wage-earner dies. These households may lose their only life insurance coverage if they become unemployed or have their work hours reduced. Source: The Facts about Life, LIMRA International, Policy loans will reduce available cash values and death benefits and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change and you should consult a tax professional. Page 3 of 8 1

4 What you need to know about life insurance Which type of policy is a good fit for you? Because no single type of life insurance is right for everyone, there are several options from which to choose. One of these may be a good fit for you: Term insurance Term policies provide life insurance coverage for a specific period of time. If you buy a 20-year term policy and live to the end of the term, for example, the policy will terminate. Term policies offer the advantage of level premium. Some also offer options to continue coverage at the end of the term, convert the policy to a cash value life insurance policy, or special features such as return-of-premium riders (these features may vary by product, and are available at extra cost). Whole life Whole life insurance also offers the predictability of level premium payments and can provide coverage for your entire life (instead of a set term). Unlike term policies, whole life policies have the potential for cash value accumulation you can access through policy loans and withdrawals. 1 Universal life Universal life insurance also provides coverage for your entire lifetime. Universal life offers you the flexibility to pay your premiums at any time and in any amount (subject to some limits), as long as the policy expenses and cost of coverage are met. Universal life policies also have the potential for cash value accumulation that can accumulate at a declared interest rate, and which you may be able to access through loans and withdrawals. 1 Fixed index universal life Fixed index universal life (FIUL) insurance works the same way as a universal life policy, but with the addition of potential indexed interest. Indexed interest is credited based on changes in an external index or indexes, which you choose when you buy the policy. Your policy s potential cash value can accumulate tax-deferred, and you can access any available cash value through loans or withdrawals. 1 1 Policy loans and withdrawals will reduce available cash values and death benefits and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change and you should consult a tax professional. 2 Page 4 of 8

5 What you need to know about life insurance How much insurance do you need? The most basic purpose of life insurance is to provide a death benefit. To determine the amount you need, your agent may ask you to consider the following: One-time costs: If the unexpected were to happen, what unfinished business might your family face? One-time costs could include funeral expenses, medical bills, estate taxes, mortgage balance, debt payoff, a college fund, and others. Living expenses: Would your spouse s income cover all of his or her living expenses? Living expenses include items like rent, mortgage, groceries, prescriptions, health insurance, utilities, transportation, child care, and even entertainment. Years of need: Finally, for how many years would your spouse or family need income? Depending on your age, your spouse or children could potentially need income for 20 or 30 years, or more. Your agent can walk you through a simple worksheet to estimate how much life insurance you need. But how much you choose to buy can be a matter of personal preference. It can be a simple equation and a personal decision, too. There are many reasons to buy more insurance than you actually need. Perhaps you d like to provide some nice extras for your family. Perhaps you want to provide some capital to help your business expand. Or maybe you want your policy s potential cash value to accumulate faster, so you can use it to supplement your retirement income. Whatever your goals, your agent can help you find a policy and a death benefit that meets your needs. Whatever your goals, there s a life insurance policy that can meet your needs. Page 5 of 8 3

6 What you need to know about life insurance Who are your beneficiaries? Naming your beneficiaries can be a very personal and emotional decision. Although there is no right way to choose your beneficiaries, keeping a few things in mind can reduce the risk of complications down the road. Use a proper estate-planning strategy Although it may be tempting to leave the proceeds of your life insurance policy to your estate, doing so will cause your policy to go through probate. This could greatly delay the distribution of your life insurance benefits to your beneficiaries, and it could result in benefits being allocated in ways you hadn t expected. Instead, select a specific beneficiary (or beneficiaries). This not only makes it more likely that the death benefit will be paid immediately to your loved ones, but also that they ll be distributed according to your wishes. Be sure to consult your attorney regarding your individual situation. Name your beneficiaries with care Be mindful of how you word your beneficiary designations. Naming the wife of the insured, for example, could result in an ex-spouse getting the proceeds. Conversely, naming specific children may exclude those born later. Also, be sure to name a contingent (secondary) beneficiary, just in case you outlive your first beneficiary. To avoid unintended outcomes, consider consulting your financial professional or working with an attorney who specializes in estate planning before you name your beneficiaries. Update your policy A little forethought today could pay off down the road. It s critical to employ proper estate planning and to carefully name your beneficiaries, but it s equally important to make sure that information stays up-to-date. One way to do this is to schedule regular life insurance policy reviews with your agent. As part of a policy review, your agent will review your current coverage, make any recommendations based upon your needs, and update your beneficiary designations. 4 Page 6 of 8

7 What else can life insurance do for you? Some policies give you cash value accumulation potential. Some types of life insurance apply a portion of your premium payment to your policy s cash value, which accumulates as you make additional premium payments. You also have the potential to earn interest at the end of each policy year, and any interest you earn grows tax-deferred. Life insurance can provide access to your cash value. Some people pay additional premium into their policy to help increase the cash value accumulation potential. The cash value can be accessed through policy loans or withdrawals for financial needs such as supplementing their retirement income, supplemental college funding, or emergencies. 1 Consider the potential tax benefits. Your policy s cash value can grow tax-deferred, which may help it accumulate faster. You won t have to pay taxes on your policy s cash value accumulation unless you take a loan or withdrawal from your policy. Your policy s death benefit is also income-tax-free for your beneficiaries. Should they receive a death benefit down the road, they won t have to pay income taxes on the proceeds from your policy. Is life insurance right for you? Ask your agent to show you how it can provide a death benefit and be a valuable part of your overall financial strategy. FPO - business card slits 1 Policy loans will reduce available cash values and death benefits and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change and you should consult a tax professional. Please note that loans and withdrawals under an MEC are taxable to the extent there is a gain in the contract and, if taken prior to age 59½, a 10% federal tax penalty may apply. In any case, a gain in the contract is taxable if you surrender the policy. Page 7 of 8

8 True to our promises so you can be true to yours. A leading provider of annuities and life insurance, Allianz Life Insurance Company of North America (Allianz) bases each decision on a philosophy of being true: True to our strength as an important part of a leading global financial organization. True to our passion for making wise investment decisions. And true to the people we serve, each and every day. Through a line of innovative products and our network of trusted financial professionals, Allianz helps more than 1.2 million people as they seek to achieve their financial and retirement goals. Founded in 1896, Allianz is now proud to play a vital role in the success of our global parent, Allianz SE, one of the world s largest financial services companies. While we pride ourselves on our financial strength, we re made of much more than our balance sheet. We believe in making a difference with our clients by being true to our commitments and keeping our promises. People rely on Allianz today and count on us for tomorrow when they need us most. Guarantees are backed solely by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. Products are issued by: FPO - business card slits Allianz Life Insurance Company of North America PO Box Minneapolis, MN Product and feature availability may vary by state. (R-12/2010) Page 8 of 8