- Security policy
A group-term life insurance is a type of security policy which provides cover to groups of people who are members of common societies, professions or employees sharing a common employer (Marcinko, 2005). It is largely considered as an ‘employee-employer’ policy whereby members working under the same employer get covered or non employee-employer, whereby people with same common similarities other than employment are covered from life-related risks.
Late last month my wife, Jane and I took group-term life insurance policy from Jubilee Insurance Company. The intention of the security was to cover the lives of my wife, two children and I from uncertainties like sickness, accident or death. The beneficiaries to the policy are Jane, the children and I. Jane and I are supposed to pay the entire premiums amounting to $60,000 for a period of 10 years. This means that we are supposed to part away with $6,000 annually which is equivalent to $500 monthly for a period of ten years. Top achieve our intention, we had targeted a security with a total premium of $50,000 so that we could enjoy tax exemptions from the state. These premiums would also be carried over by our employer (public service) under the IRC (Internal Revenue Collection) section 79 of the constitution of United States. In this case, the public service commission would pay for our premiums or arrange for their payments. Since we are under the same employer, payment of premiums from any of us would also subsidize another’s premium, which is beneficial to us.
However, factors like age and the payment period complicated the matter during premium calculations using the premium tables. We are now supposed to pay $10000 above the normal non-taxable premiums. This will further subject our premiums to state tax which is determined by the IRS (Internal Revenue Service) premium tables. This has made the value of our policy to be of high-level and devoid of implementations. This is because our combined monthly income can not guarantee us to part away with more than $500 a month for a period of 10 years considering the fact that we are social workers.
2. Financial impact
The main objective of group-term life insurance is to provide financial security to the family after ones death. Therefore, before one purchases the policy, one should consider his/her financial situation as well as the living standards he/she want to maintain for the beneficial. For instance, ask yourselves these questions; who would cater for our medical bills and funeral expenses? Would the family members have to be relocated? Will the funds be adequate for ongoing expenditures like mortgage repayments, daycare and college? It is at this point that ones personal income is considered to avoid the impact of cancelling the policy while underway (OECD, 2011).
The financial impact of failing to pay the entire premiums is enormous. One may lose the entire benefits of the policy; the amount of premiums paid with/without interests or both to the insurer depending on the contract they signed. This will therefore deny the insured the economic benefits of implementing the security for that period. So to guard against such financial impact on the insured, the insured should lessen the impact by taking a security that he/she is capable of completing paying premiums within the stipulated period. For instance, in the above example, Jane and I should take a policy that will be comfortably covered by our own incomes before retirement age, and guarantee us the benefits of tax exemptions as this will reduce our expenditures. If we should have to take the above security, then we have to consider may be extending the maturity period to over 10 years but within our productive age or reducing the targeted premiums to amount less than $50000. An amount we can manage throughout the premium period. This will guard us from the financial impact of losing our savings incase we fail to complete the entire premiums within the stipulated period.