Sponsored by American Bar Endowment

March 01, 2018 GPSolo

LAW AND LIFE: Group Term Life Insurance Solutions for ABA Members

By the American Bar Endowment

Most people envision fantastic futures for themselves and their family. But whether you’re sending children to college, purchasing a new home, or starting a new firm, your income is the engine that turns your aspirations into reality. What if you were to die? How would this affect your family’s plans?

Life insurance is a cost-effective way to safeguard your family’s dreams. While you could never be replaced, life insurance can help alleviate financial pressure resulting from a loss of income owing to premature death. Usually passing to your beneficiaries free from federal income tax, life insurance proceeds can help preserve your family’s standard of living, cover outstanding debts, and keep their dreams alive.

Why is term so popular? Term insurance can provide affordable protection, often with a guaranteed premium for a set period of time. If you die while the coverage is in force, the face amount is paid to your named beneficiary. At the end of the premium guarantee period, you can continue coverage at a premium that’s higher and that can increase each year—but that starts lower than a comparable permanent insurance plan.

Unlike permanent insurance, term does not accumulate cash value. This is one way the cost is kept lower than permanent insurance. There are two basic group term life insurance types: annually renewable term (ART), which renews each year at a scheduled premium; and level premium term, which features a fixed premium for a specific number of years and then increases in subsequent years.

When is term appropriate? Term insurance may be suitable for people in several situations. Here are just three examples:

1. Temporary need for protection. People often use term insurance when taking out loans. For example, term coverage in the amount of the loan could ensure the loan debt is repaid if the insured dies. Or a solo firm owner who borrows money—perhaps to enlarge his or her practice—could purchase term coverage in the loan amount. Homeowners frequently choose term to protect their mortgage over the life of the loan. And parents use term to help cover their children’s college educations if something happens to the parents before graduation.

2. Budget-minded choices. In situations where life insurance is essential but dollars scarce, term could serve as a stopgap. Lawyers starting careers may consider term coverage if they have student loans to pay off. If they die before their loans are repaid, that obligation could fall to their estate. Term insurance safeguards against that. What’s more, once they’ve achieved some level of success, they can expand their coverage to help protect the new people and circumstances in their lives, often without additional medical exams or questions.

3. As a supplement to a full financial portfolio. An excellent way to use term insurance is as a piece of a larger financial plan. Let’s say an individual wants to leave a legacy sufficient to provide for his children and grandchildren. Will remaining savings be enough? What if medical needs draw down those funds? Life insurance can be a part of an overall strategy to leave a lasting source of funds.

What Should You Look for in a Term Plan? Check out the plan features. Make sure it’s guaranteed renewable—that is, you can renew your coverage without undergoing a physical exam. You’ll also want to understand the rate classes because they will impact your cost.

Cost isn’t everything. Be sure that the insurance company is financially sound. Check its longevity, size, and ratings by reading what independent ratings agencies say about it. A.M. Best and Standard & Poor’s are two companies that publish annual ratings of insurance companies.

A plan created with you in mind. The American Bar Endowment plans offered by New York Life Insurance Company were designed with you in mind. They’re for today’s dynamic professionals—people who want to make their financial futures more secure.

To find out more, including features, costs, eligibility, renewability, limitations, and exclusions about group term life insurance, contact the American Bar Endowment at abendowment.org, or call 800/621-8981.

This information is courtesy of New York Life Insurance Company, used with permission. It is intended exclusively for general information only.

American Bar Endowment

The American Bar Endowment (ABE) is a sponsor of the ABA Solo, Small Firm and General Practice Division. Neither the ABA nor ABA entities endorse non-ABA products or services. This column should not be construed as an endorsement. ABE, a 501(c)(3) public charity, supports good works of importance to the public and the legal profession through grants made possible by sponsoring insurance plans for attorneys. For more, go to abendowment.org.