Connecticut Life Insurance for Seniors

How a Life Insurance Policy Works

A life insurance policy is a contract with a life insurance company. You pay premiums, and when you die the insurance company pays a death benefit to the people you name, usually your loved ones. That death benefit is generally income tax free to your beneficiaries. The point of life insurance protection is simple: your death shouldn't become a financial burden for the people who depend on you.

Life insurance coverage provides financial protection in a few specific ways: income replacement if your paycheck stops, money to pay off financial obligations like a mortgage or car loan, cash for everyday expenses while your family adjusts, and money for funeral expenses. Handled well, it protects your family's financial future and gives you real financial security.

How Much Life Insurance Do You Need Beyond Employer Provided Life Insurance?

A common starting point for how much life insurance to buy is 10 to 12 times your annual income. A life insurance calculator refines that by adding your debts, years of income your family would need, childcare and college costs, and final expenses, then subtracting savings and any existing coverage. You can do the same math on paper, or an insurance agent can walk through your life insurance needs with you.

Don't count only on employer provided life insurance. Group life insurance through work is often just one or two times salary, and it usually ends when you leave the job. Most families with young children need more coverage than a group plan gives, and employer provided life insurance rarely follows you into retirement. Deciding how much coverage to carry is the first step, before choosing a policy type. For family-specific numbers, see life insurance for new parents.

Term Life Insurance vs Permanent Insurance

Term life insurance covers you for a set period, usually 10, 20 or 30 years, at level premiums that don't change during the term. A term life insurance policy has no cash value, which is why term life has the lowest life insurance cost per dollar of coverage. It's also the easiest way to fill the gap that employer provided life insurance leaves. It's the usual choice when the need has an end date, such as raising children or paying off a mortgage. Many term policies can be converted to permanent coverage later without new health questions, which is worth checking before you buy.

Permanent Life Insurance: Whole Life, Universal Life Insurance and Indexed Universal Life

Permanent life insurance lasts your entire life as long as you pay premiums, so permanent insurance is the choice when you want lifelong coverage rather than protection for a set number of years. Permanent life insurance policies offer lifetime coverage, and most also build cash value. That lifelong protection comes with much higher premiums than term for the same death benefit. The main types of permanent life:

• Whole life insurance. Fixed premiums, a guaranteed death benefit and guaranteed cash value growth. Whole life is the most predictable permanent policy and usually the most expensive.
• Universal life insurance. A universal life policy lets you adjust premium payments and the death benefit within limits, and its cash value earns interest. Guaranteed universal life trades most of the cash value for lifelong coverage at a lower price.
• Indexed universal life insurance. A form of universal life insurance, indexed universal life credits interest based on a stock market index, subject to a cap on gains and a floor that protects against losses. Indexed universal life illustrations depend on assumptions, so read the guaranteed values.
• Variable universal life. Cash value is invested in subaccounts similar to mutual funds, so it can grow or lose money. It's sold only by representatives licensed to sell securities, with a prospectus.

Permanent insurance makes sense when you want coverage that can't run out: leaving money to heirs, estate planning, or a permanent policy for a spouse's lifelong income. Universal life and whole life suit different goals, so compare both before you choose. Because permanent life insurance costs several times more than term, a common approach is term for the large income need plus a smaller permanent life insurance policy for lifelong coverage. Seniors should read life insurance for seniors.

Cash Value, Policy Loans and Taxes

Permanent policies build cash slowly at first, then faster over time. You can borrow against the policy's cash value through policy loans, usually without a credit check. Outstanding policy loans, plus interest, are subtracted from the death benefit your family receives. If loans grow larger than the cash value, the policy can lapse, and a lapse or surrender can have tax consequences. Talk with a financial advisor or tax professional before borrowing heavily or surrendering a life policy.

Many policies also include an accelerated death benefit, which lets you receive part of the death benefit early if you're diagnosed with a terminal illness. Check whether it's included or offered as a rider.

Final Expense: Lifelong Coverage When Health Issues Limit Your Options

Final expense coverage, also called burial insurance, is a small whole life policy with a smaller death benefit, typically $5,000 to $25,000, meant for funeral expenses and final bills. Final expense policies are whole life, so they offer lifelong coverage with premiums that never rise. If health issues make other coverage hard to get, guaranteed issue life insurance accepts you with no medical exam and no health questions. The trade-off is a waiting period of two to three years before the full benefit is paid. See final expense insurance and no medical exam options.

Life Insurance Cost and When You Need a Medical Exam

Life insurance rates depend mostly on age, health, tobacco use and the amount of coverage. A health condition may raise the price or change which life insurance options you qualify for (see life insurance with health issues), and a medical exam can earn the best rates if you're healthy. Insurance costs vary widely between companies for the same person (more in our life insurance cost guide), and insurers treat the same health issues differently, so comparing matters. People with health issues often get a better life insurance cost by applying through an agent who knows which insurer is most lenient for their condition.

Getting a Life Insurance Quote Online and Choosing a Company

A life insurance quote online gives a quick estimate, but the final life insurance cost is set after underwriting, which may include a medical exam. When you buy life insurance, check the company's financial strength rating, which measures its claims paying ability. The best life insurance policy is the one that fits your need and budget from a company that will be there to pay. If you're replacing coverage, keep the old policy until the new life insurance policy is approved and in force. The same goes for permanent insurance: surrendering an older permanent policy can cost you cash value and restart the contestability period. A licensed Connecticut agent can compare several insurers and help protect your family's future. Request free quotes.