Life insurance helps protect your loved ones if you are no longer here to provide for them.
A death in the family is not only emotionally devastating, it can also take a tremendous toll on the future financial security of a family. Suddenly, without the deceased’s income, paying the mortgage or providing for a child's college education may become much more difficult.
Those who buy life insurance do so to help ensure their loved ones are taken care of financially. Life insurance is a promise by an insurance company to pay those who depend on you a sum of money upon your death. In return, you make periodic payments called premiums. Premiums can be based on factors such as age, gender, medical history and the dollar amount of the life insurance you purchase.
In the event of your passing, life insurance provides money directly to the individuals you select, your beneficiaries, who can use the money as they see fit, including:
Life insurance comes in two main types – term and permanent – which may both be available through your workplace.
Term life insurance pays a specific lump sum to your loved ones for a specified period of time – usually from one to 20 years. If you stop paying premiums, the insurance stops. Term policies pay benefits if you die during the period covered by the policy, but they do not build cash value. They may also give you the option to port. That is, you can take the coverage with you if you leave your company.
Generally, you should consider a term life insurance policy to:
Permanent life insurance policies do not expire. They are intended to protect your loved ones permanently, as long as you pay your premiums. Some permanent life insurance policies accumulate cash value. That means, the value of the policy will grow each year, tax-deferred, until it matches the face value of the policy. The cash can generally be accessed via loans or withdrawals, and can be used for a variety of purposes. This type of plan is typically portable so coverage can continue if employment terminates.
Consider a permanent insurance policy if you want:
Getting life insurance through work can be an easy way to protect your family. If your employer offers a group plan, consider signing up for advantages that may include:
All you have to do is sign up, and sometimes enrollment is automatic.
While you won’t be able to pinpoint the amount you’ll need to the penny, you can make a sound estimate. Your goal should be to develop a life insurance plan that, following your death, will allow your family to live comfortably without your economic contribution. Also consider the effect of inflation over time. The amount needed for retirement or college 20 years from now is likely to be significantly higher than today.
To estimate the amount of life insurance your family would need, first calculate everything you now provide for your family including:
Then, subtract your personal expenses including:
Life insurance through your workplace may be more affordable than you think. In fact, many people can get term life insurance coverage from a quality company for a surprisingly low price.1
Premiums are typically based on factors such as:
Life insurance gets more expensive as you get older, and the type of coverage you choose will also affect your premium. Rates for term insurance are typically lower, while rates for permanent policies are typically higher.
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 you would not have to pay income tax on any of the policy’s earnings 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).2
Like most group life insurance policies, MetLife group policies contain certain exclusions, reductions, limitations, and terms for keeping them in force. Please contact MetLife for costs and complete details.
Group Term Life is issued by Metropolitan Life Insurance Company, New York, NY 10166. Policy Form GPNP99.
1 Life insurance policies contain certain exclusions, limitations, exceptions, reductions of benefits, waiting periods and terms for keeping them in force. Please contact your company’s benefits administrator for costs and complete details.
2 Any discussion of taxes is for general informational purposes only and does not purport to be complete or cover every situation. MetLife 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.