Frequently Asked Questions
Life insurance pays out a sum of money to your designated beneficiary, and can help your loved ones:
- Replace lost income.
- Pay for final expenses, estate taxes and/or debts.
- Cover basic living expenses.
- Supplement retirement savings.
- Term Insurance - a type of coverage offered by most employers. It pays a specific lump sum to your beneficiary during the term of the policy. This may also give you the option to port, that is take it with you.
- Permanent Life Insurance - some employers offer this type of coverage option where your beneficiary will receive the life insurance proceeds, which includes any money you have set aside in the policy's tax-deferred cash value account. You can also borrow or withdraw money from that account.
First, you will need to consider any immediate needs, such as burial and funeral expenses. Also keep in mind everyday needs as well as larger expenses your family may need to live comfortably and have financial stability in the event of your death. Don't forget to include future needs such as savings for college and retirement. Finally, remember to consider the effect of inflation over time the amount that will be needed twenty years from now may be significantly higher than it is today.
In addition to being financially secure, the life insurance company you choose should have a good claims payment history, good customer service and competitive pricing. Sources such as Standard and Poor's, A.M. Best, Moody's, Fitch, and Weiss rate insurance companies. Information from these resources can be found on the internet.
Life insurance may be less expensive than you think. In fact, many people can get term life insurance coverage from a quality company for a surprisingly low price. Life insurance does get more expensive as you get older.
Premium rates for life insurance are typically based on factors such as:
- Age, sex, height, and weight
- Health status, including whether or not you smoke
- Participation in high-risk occupations
The type of policy you purchase will also affect the amount of premium that you will pay. Rates for term insurance are typically lower, at least at younger ages. Premium rates for permanent policies, like GVUL and GUL, are typically higher.
When you purchase life insurance through the workplace, you have the following advantages:
- Competitive group rates
- Guaranteed issue means you can get a certain amount of coverage without answering health questions or taking a medical exam.
- Convenient payroll deductions.
- Easy access to enrollment support tools and educational tools that can help you make the right decisions about what type and amount of insurance is right for you.
- The confidence that your employer has reviewed and selected the plan.
It’s a good idea to review your coverage every few years to make sure it still meets your financial needs. Check to make sure that all beneficiary and other information are current. It might be time to re-evaluate, if you:
- Recently married or divorced.
- Provide care or financial help to a child or parent.
- Want to ensure that financial resources are available to provide assistance or long-term care for a loved one.
- Purchased a new home.
- Have children or grandchildren who are about to enter college.
- Receive an inheritance.
- Have a child or grandchild who was recently born or adopted.
- Refinanced your home mortgage in the past six months.
Death benefits are generally received income tax-free by your beneficiaries. In the case of Permanent Life Insurance policies, cash values accumulate on an income tax-deferred basis. That means that you would not have to pay income tax on any earnings in the policy as long as the policy remains in effect. In addition, most policy loans and withdrawals are not taxable (although withdrawals and loans will reduce the cash value and death benefit).
Your life insurance beneficiary serves a very important purpose - making sure your benefits are distributed as you intended. Without a validly named beneficiary, the life insurance proceeds payable as a result of your death will be distributed according to the terms of the insurance contract. This may result in the proceeds going to a family member, such as spouse, children, parents or siblings, or it may go to your estate.
"Any discussion of taxes is for general informational purposes only and does not purport to be complete or cover every situation. MetLife, its agents and representatives may not give tax advice and this document should not be construed as such. Please seek advice based on your particular circumstances from a qualified tax advisor."