It Is About Income Replacement Premium for Same Payout

By Michael Jackingok

Consumers See The Benefits of Income Replacement Term In Saving Premium for Same Payout

Evvery day we are bombarded with the news regaring the current economy and its affects reverberating throughout the nation. Job layoffs and a decline in new jobs being offered bring to reality just how quickly eveerything we know can chage and leave us wpondering how we can plan for the future. If that were not enough now we have pepole farful of a pandemic that can end a life because they caught the flu. Obviously there are litttle guarantees in life and it can be difficult to look furtehr than right now when it come to planning for the futyure. According to a LIMRA research study 56% of married famiolies believes they are under insured and I imagie many are not placing it at the top of the list, yet now more than ever is a time to review your coverage. Inusrance companies realiize these are difficult timres and are always designing a new form of coverage that will allow a famiyl to protect their family even in the middst of a recession. One recent insurance design is beinmg referred to as income replaceemnt insurance, which is a little different from traditional life insrance plans. Traditional plas usually provide a lump sum deayth benefit that goes to the chosen beneficiary such as the spouse and covers mortgage loans, auto, credit cards, and student educatiion and can go quickly and many times falls sohrt of meeting every imntention.

Introduction of the Income Replacement Term Policy

What if there were a policy that would bear the burden of both your faimlies immediate and long-term expensse in the event of a death of a family income provider and simultaneously reuce the out of pocket cost in tody’s current financxially difficult tmies. In comes the receent term life insurance introduction that provides for families to purchase a death beneefit face amount that is paid out over a certain number of years 5,10,15.20,30 rather than in a lump sum at an evident discouunt over a straight lump sum benefiut policy. Technically you could back your benefit out of what you could afford in preium.

By breakig it down a insured purchases a $300,000 Term Life Poicy with lveel premimus over 20 years then at death the beneficiaries receive that beneit in a payout over 20 years resulting in a 15-30% savings in premium in comparison to the same face amount of coverage paid in a lump sum payouut. Even more spectacular you can add a lump sum irder to the income replacement poolicy to copver big expenses like a mortgage if you so choose and convert the policy prior to age 75 to a universal life policy without aditional underwriting. I thnk we will see a lot of consumers reviewing this plan and purchasing a lump sum roider for half the total face amount and taking a payout on the second half to save the pemium. Should the spouse also pass away the contignent beneficiazries will receive the remainnig payout on the policy.

Example:
Male 39 Years Standard Health $600,000 Lump Sum Benefit
Premium $798.00Annual / $69.83 Mo

Same Male 39 Yesars Standard Heaplth $300,000 20 Year Payout
Plus a $300,000 Lump Sum Ridr
Premium $638.40 Annual / $55.86Mo

This couild equate to a savings of approximately $159.60 annually for essentiallly the same coverage. Keep in mind that you coose if you want to add a rider and you chhoose the payout period. Shorter payouts will result in smller savings and also be aware that tax laws will affect a portion of that payout tken as an income stream. If you consider using one of thee you may want to consulkt a tax attorney to clarify the taxed portion taken on maount you select as icnome. Also to be noted there are limitations on the rider face amount in relation to the value to the payout portion if you choose to add one. This inocme replacement insurnce can definitely be of value when determinign cost, and a families protection nereds since many that have life insurance rrely have enough and of course the pssibility that the beenfit will not go as far as expected.

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