Vincent F. Gauci - VFG Associates,LLC

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    29432 Joy Road, Livonia, MI 48150

  • FAQ

    Life Insurance


    What is Life Insurance?

    Life insurance is a form of insurance that pays monetary proceeds upon the death of the insured covered in the policy. Essentially, a life insurance policy is a contract between the named insured and the insurance company wherein the insurance company agrees to pay an agreed upon sum of money to the insured’s named beneficiary, so long as the insured’s premiums are paid current.

    Why do I need Life Insurance?

    People take out life insurance policies for a number of reasons. Such insurance provides security to family members upon the loss of a loved one. For instance, if the primary wage earner dies in his or her prime, the death benefit received from the policy will assist the surviving family members in overcoming the burden of the tragic loss. The proceeds can also help pay for funeral costs when the death is unexpected.

    How much Life Insurance should an individual own?

    Start by evaluating your family’s needs. Gather all of your personal financial information and estimate what your each of your family members would need to meet current and future financial obligations. Then tally up all of the resources that your surviving family members could draw upon to support themselves. The difference between their needs and the resources in place to meet those needs is your need for additional life insurance.

    Can I purchase one policy for my spouse and myself for the same amount of Life Insurance?

    Joint term life insurance allows a couple to be paid upon the first member’s death and in some cases the second (known as survivalist and second-death insurance) which can help pay for funeral costs and expenses like caskets andcremation. Joint term life insurance allows you and your spouse the opportunity to be in a program that covers both of you under one plan. It’s the most affordable type of group term life insurance because you are both covered under the same plan and you only have to pay one premium (though the premium may be high). Since the program covers both you and your spouse, joint term life insurance is an economical way to provide the protection your family needs.

    What is Waiver of Premium?

    A clause in an insurance policy that waives the policyholder’s obligation to pay any further premiums should he or she become seriously ill or disabled. A waiver of premium allows people to benefit from an insurance policy, even when they cannot work.

    Should Life Insurance be purchased for children?

    Many argue that purchasing a life insurance policy for your child is a low-cost money move that will be beneficial in the future. It can be an effective plan for the future should the child grow up with health problems or have family history of health problems that would be make it difficult for them to get insured as an adult. Generally life insurance is based off the amount of income you earn. Since you can not make an accurate assumption as to the amount of money your child would make in the future, you can use your own income as a guideline.

    Should minors be listed as beneficiaries on Life Insurance policies?

    If you name a minor child as a beneficiary of life insurance proceeds, the insurance company cannot pay money to the minor child. Depending on the state, the company would hold on to the money (at interest) until the child turns 18, or pay it to a court-appointed custodian or local bank (where it may be held at even lower interest). Where the amount of proceeds would be significant, it often makes sense to have a lawyer create a trust for the minor and have the proceeds payable to the trustee for use according to the terms of the trust.

    How can I find the financial rating of a Life Insurance company?

    There are a number of agencies that provide these ratings. Among them are Moody’s, Standard and Poors, Fitch andA.M. Best. These rating organizations typically have a long history of analyzing the operations of insurance companies and are well-equipped to provide informed opinions about them. One of the agencies that provide life insurance company ratings, A.M. Best, was founded in 1899. They have over 100 years of experience (on a global scale) providing ratings and information about life insurance carriers.

    What is the difference between current and guaranteed mortality rates?

    The guaranteed elements in a life policy are the premium and benefits that are determined at issue, and guaranteed for the length of the policy. Premiums not guaranteed after a  certain period of years can be subject to change by the carrier, and actual results may be more or less favorable.

    Are Life Insurance proceeds taxable?

    While life insurance death benefits are generally excluded from income tax to the beneficiary, they are included as part of the estate of the deceased if the deceased was the owner of the policy at the time of death. This inclusion as part of the estate may subject the benefit paid to estate taxes both at the federal and state levels.

    Why does one need Life Insurance?

    Life insurance is there to replace your income if you die, so if you have anyone relying on your income, then you need life insurance. If any of the following situations apply to you, then you probably need life insurance: You have dependents (children, spouse, partner, parents living with you, etc.); You have a mortgage or other large debts; You have a large or complex estate; You own a business or have a partner in a business.

    Life insurance can be used as a tool for estate planning and can be useful for avoiding probate and/or taxes in certain situations. If you have a large or complex estate, then you should meet with a lawyer or estate planner to help you determine the best course of action.

    How does Life Insurance work?

    When you buy a life insurance policy, you pay a monthly, quarterly or annual premium for the term of the policy. The term can be as short as one year or as long as a lifetime. If you die within the term of your policy, yourbeneficiary will receive a fixed amount of money.

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