Death can be an emotionally devastating time – beyond just losing your loved one, there is plenty of financial uncertainty as well. After losing your loved one’s income, paying for a mortgage or providing for a child’s college tuition becomes more difficult. That is why Inland Northwest Insurance provides life insurance to residents of Spokane, Spokane Valley, Mead WA, Walla Walla and the entire state of Washington.
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Life insurance is an agreement between yourself as the policy holder to pay regular installments (called premiums) to an insurance company in return for them paying your dependents a sum of money upon your death. The amount you pay as a premium depends on a variety of factors, including your age, gender, medical history and the level of life insurance coverage you purchase. Simply put, life insurance protects those that financially depend on you by allowing them continue to afford a comfortable lifestyle
Should you pass, your life insurance will provide money directly to your dependents (known as beneficiaries), who can then use this payment as needed, including for:
- Paying for children’s education costs
- Basic living expenses (rent, mortgage, transportation, utility bills)
- Household debts or estate taxes
- Funeral expenses or hospital bills
- Replacing the lost income of the policy holder
- Augmenting retirement savings
Although life insurance can help your beneficiaries afford and maintain a certain lifestyle, it is important to remember that it is not a way to leave a life of luxury for those you leave behind. Life insurance is a supplement to ensure a smooth transition while your family transitions to life without you, particularly if you are the primary income source.
Life insurance is an important part of estate planning, especially for those with a family that financially depend on them. While estate planning, ask yourself several important questions:
- Can your family afford funeral expenses if you unexpectedly pass?
- How many people depend on your income? How much money do they need for living expenses?
- Do you have a complicated will? Do you have a will at all?
- Would your spouse, children or other family members be able to financial survive in the case of your premature death?
- How long would it take for them to become self-sufficient?
- If you are a primary caregiver, what would it cost to replace you with a paid provider?
According to the Insurance Information Institute, these are among the questions you should ask where it may become apparent that your dependents need some financial assistance. This is where life insurance can come into play to help them in the wake of your passing.
There are two main types of life insurance offered by insurance companies in the Spokane Area – term and permanent.
Term life insurance pays out a specific lump sum over a period of time. The amount of time is specified in your policy, but is typically between one and 20 years. When you stop paying your premiums, term insurance stops. This type of policy will pay benefits if you die during the time covered in the policy, however it does not build cash value. A term policy may be better for you if you are looking to:
- Acquire coverage at a more affordable cost
- Cover specific financial costs such as a mortgage or college tuition
- Supplement your permanent life insurance
Term life insurance is the most popular form of coverage, as it is an affordable policy and protects you and your family over a specific term. There are several advantages, including that the policies are straightforward (with no hidden fees or exclusions) and can be cancelled at any time before the expiration of the policy. Term life insurance is the most accessible way to acquire coverage, and is beneficial even if you do not have significant financial assets or are far away from retirement. Term life insurance is an especially prudent choice if you are in the middle of your life and building up savings to self-insure later in life.
In contrast to term policies, permanent life insurance policies do not expire. These policies protect your family permanent – as long as you remain current on your premiums. Depending on the type of permanent life insurance policy you purchase, the policy may accumulate cash value. This means that the policy’s value grows over time (with taxes deferred) until it matches the face value of your policy. This cash can be accessed through loans or withdrawals, which can then be used for specific purposes (often defined within the policy itself). A permanent policy may be better for you if you are looking to:
- Have protection for your entire life
- Keep payments the same every year
- Add money on a tax-favored basis
- Build cash value you can use while you are still alive
Because permanent life insurance never expires, it is an excellent piece to include in your financial and estate planning, especially if you have a lot of money or assets in your portfolio. Permanent life insurance is a good option if you have significant financial assets, an unusual financial situation or are nearing retirement.
How much your life insurance will cost depends on a variety of factors, including:
- What level of coverage you purchase
- Type of life insurance (term or permanent)
- Length of term (for term policies)
- Your age
- Your Gender
- Your marital status
- Your medical history
- Whether or not you smoke
- Your occupation (high-risk occupations may cost more)
- Medical exams (no exam policies are available – ask your Inland Northwest Insurance agent for more information)
As you age, life insurance tends to get more expensive. Considering all these factors, term insurance will typically still have lower rates. Some factors that play into other insurance premiums (such as the state you live in) are not considered for life insurance premiums.
In addition to the supplemental income, there are several other advantages to life insurance.
The proceeds of your life insurance policy will not be subject to probate unless your estate is the beneficiary of the policy. Probate is the court-supervised process following your death that includes proving the authenticity of your will, appointing someone to oversee the will, paying debts/taxes, identifying your heirs and distributing your property in accordance with the will. This can be an expensive and time-consuming process. However, with a life insurance policy, as long as anyone but your estate is the beneficiary, your proceeds will be quickly transferred without needing to go through the probationary estate. Avoiding probate is a financially sound decision, as the fees associated with it can take up to 5% of your estate’s total value.
Avoiding Estate Taxes
Life insurance can be used to significantly reduce your estate tax liability. If you do not legally own your life insurance policy, the proceeds from it are not included in your taxable estate. Ask the experienced agents at Inland Northwest Insurance about how you can use life insurance to reduce your estate tax bill.
Keeping Your Business Afloat
If you are the sole owner of your business, this becomes one more beneficiary you need to keep in mind. Especially if you intend that one or some of your heirs will continue this business, it is important to consider how much cash flow will be required for them to successfully maintain the business. Your life insurance proceeds can be used to help cover any cash flow shortages that may occur in the case of your premature death.
Regardless of your current economic situation or lifestyle, we’ll try to obtain dependable coverage for you at a reasonable price. Inland Northwest Insurance is dedicated to your satisfaction, so we’ll explain any points that you’re uncertain about. As residents of Spokane ourselves, our community is important to us and protecting our neighbors is part of our business. Whether you’re in Spokane Valley, Mead WA, Walla Walla or anywhere throughout Washington, you can rest easier in the knowledge that your loved ones will be protected from financial stress with life insurance from Inland Northwest Insurance.