Term life insurance policy w/tax-deferred annuity rider?
by admin on Monday, May 24th, 2010 | 4 Comments
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Grab your wallet any time you hear the term “annuity.” You’re better off buying your own life insurance independent of any employer-sponsored plan.
I’ve never heard of an annuity rider on a term policy. I’m not aware of anyone out there. I would be interested about what company the policy is from so that I could research it further.
My guess would be that it is a return of premium rider which if you keep the policy until the end of the term you get your premiums back. The waiver of premium rider is a great rider that should be on all life insurance policies.
This scenario sounds weird to me. Why are they offering employees just one product? Usually an employer offers group life insurance. Do you offer that? Then if a company is going to come in they should be able to offer a lot more products than just one. You have different employees with different needs. I would also be weary of what insurance company the policies are with to make sure they are a top rated company, especially in these economic times.
Please let me know if you have any questions.
Get a second opinion.
You should first decide what you want these product to accomplish.
Who will be covered? What amounts? Is this just a benefit that the employer is adding to the employee benefits package.
Ten year term life is about the cheapest life insurance available. It also is about the most useless.
To make an analogy, you are buying El Cheapo computers with almost no software loaded so you have to go an buy more software to install. After a year, the computer is obsolete. Yes, you saved money the year that you bought the original computers but they didn’t get you where you wanted to end up and were more expensive in the long run.
Do yourself and your employees a favor. Learn more about financial planning and how adequate life insurance fits into the picture.
Good Luck.
I believe you or either that company has some mission information. Term insurance does not build any savings or cash value, so there can’t be an annuity rider attached to it. A 10 year term seems a bit short, don’t you think? And do you know when it is time to renew, premiums will go up? “The waiver of premium” rider is where if you become disabled, the insurance company will pay the premiums for you until the end of the term.
Anyway, annuities grow tax-deferred. It’s an investment and life insurance at the same time. There’s 2 phases of an annuity contract. The first phase is called “accumulation phase.” This is where you can put money into it at anytime. At the same time, it provides life insurance. It will guarantee you a minimum coverage by the total amount you put into the plan. For example, if you invested a total of $10,000 and someday you die during the accumulation phase, it will pay your beneficiary at least $10,000. I say at least because the value of your account can grow larger than $10,000. For example, if you invested $10,000 and the value of your account was $15,000 and someday you die, it will pay your beneficiary $15,000.
The 2nd phase of the annuity is called “withdrawal phase.” This is where you want your annuity to start paying you. There’s several options you can take. You can either take it in one lump sum OR you can get paid for life. Either way, you will pay income taxes on the gains. During the “withdrawal phase” the contract does not provide life insurance anymore.
I personally believe that annuities are great products, but many companies have high fees associated with them, making this product very unattractive. I think the best annuity product is offered by Metlife’s Prime Elite IV. It has low fees and operating expenses and it has many guaranteed features such as increasing the value of your portfolio for up to 10 years during rough economic times (such as the one we are in now).
If you are looking for life insurance and a retirement plan for your company, I would look into group life insurance and the 401(k) plan.
If you doing this for yourself, I would look into term insurance and IRAs.