Life and AD&D Insurance

Why Do I Need Life Insurance?

Life insurance is an essential part of financial planning. One reason most people buy life insurance is to replace income that would be lost with the death of a wage earner. The cash provided by life insurance also can help ensure that your dependents are not burdened with significant debt when you die. Life insurance proceeds could mean your dependents will not have to sell assets to pay outstanding bills or taxes. An important feature of life insurance is that no income tax is payable on proceeds paid to beneficiaries. The death benefit of a life policy owned by a C corporation may be included in the calculation of the alternative minimum tax.

How Much Insurance Do I Need?

Before buying life insurance, you should assemble personal financial information and review your family’s needs. There are a number of factors to consider when determining how much protection you should have. These include:

  • any immediate needs at the time of death, such as final illness expenses, burial costs and estate taxes
  • funds for a readjustment period, to finance a move or to provide time for family members to find a job
  • ongoing financial needs, such as monthly bills and expenses, day-care costs, college tuition or retirement

Although there is no substitute for a careful evaluation of the amount of coverage needed to meet your needs, one rule of thumb used is buy life insurance that is equal to five to seven times annual gross income.

Choosing A Plan

Buying life insurance is not like any other purchase you will make. When you pay your premiums, you’re buying the future financial security of your family that only life insurance can provide. Among its many uses, life insurance helps ensure that, when you die, your dependents will have the financial resources needed to protect their home and the income needed to run a household.

Choosing a life insurance product is an important decision, but it often can be complicated. As with any other major purchase, it is important that you understand your needs and the options available to you.

The main types of life insurance available are term and permanent. Term insurance provides protection for a specified period of time. Permanent insurance provides lifelong protection. To learn more about term and permanent insurance click on the appropriate button at the top of this page.

What is Accidental Death and Dismemberment (AD&D)?

AD&D insurance pays you or your beneficiaries a designated amount of money if your death or dismemberment is the direct result of an accident. However, there are coverage restrictions that make accidental death and dismemberment insurance less beneficial.

If, for example, you had a $100,000 life insurance policy and you attached an accidental death rider, and you were tragically killed in a covered accident, your beneficiaries would get a total of $200,000 from your life insurance and the rider. The fact that it can pay twice as much is why it’s sometimes called “double indemnity.”

What Does AD&D Cover?

AD&D insurance covers precisely what its name infers: accidental death and dismemberment. What does that mean? In the event of a fatal accident or an accident that results in you losing your eyesight, speech, hearing, or a limb, AD&D will pay you or your beneficiaries a designated amount. However, there are restrictions. To receive benefits related to an accident, your injuries or death usually must occur within a few months of the accident date. In addition, you will only get benefits if your death or injuries are proven, direct results of the accident.

Dismemberment coverage works on a “per-member” basis. If you lose one member (a hand, foot, limb, sight in one eye, speech or hearing), the insurance company will commonly pay 50% of the full benefit. If you lose two members, you will receive the entire benefit. Coverage amounts for partial or complete paralysis can vary, but are usually 25-50 percent.