Maryland Bar Bulletin
Publications : Bar Bulletin : March 2006

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Step Up Your Family's Protection

~Laddering life insurance helps families to reach their financial goals~

Laddering your life insurance can be a very effective method of providing financial protection for your family while allowing for the changes, over time, in your lifestyle, family responsibilities and financial position. Many young families have high death benefit needs early on that will decrease over time. As a family's death benefit needs decline outstanding mortgage liabilities become smaller, children finish college and move out of the house (you hope!) – and life insurance coverage can be designed to reflect these changes.

Laddering your life insurance coverage can be accomplished effectively using different types of policies. To provide adequate protection during times of high death benefit needs and also maintain adequate coverage for the rest of your life, start off with as much permanent whole life insurance as you can afford, supplemented by the necessary amount of term insurance to meet the total death benefit needed. Term life insurance can be the most cost-effective form of insurance to give your family protection for a finite period of time while permanent or whole life insurance provides a savings vehicle that could be used in the future to pay tuitions or to supplement retirement funds.

Consider this hypothetical example of a laddered life insurance program. Assume Mr. and Mrs. Izzo are a dual-income family with a three-year-old son and a $700,000 30-year mortgage. Both Mr. and Mrs. Izzo like the idea of having permanent whole life insurance because of the lifetime protection, cash accumulation features and tax-deferral benefits but can not afford the premiums to purchase the $1,250,000 of whole life coverage that they have decided that they each need. To meet their short-term protection needs and also put in place the benefits that permanent whole life insurance coverage has to offer, the Izzos each insure themselves with $250,000 of permanent whole life insurance and supplement that with $1 million each of 20-year term life insurance.

After six years the Izzos have another child and need coverage in place for a longer period than the remaining 14 years of their term policy. They each decide to purchase a $500,000 universal life insurance policy. The universal life policy – basically a term life insurance product with an accumulation or savings component – is very flexible and will allow them to determine how long they need to maintain the coverage.

The term insurance coverage expires at the end of the 20-year term, but since the Izzos' liabilities have decreased, they still have the necessary protection they need with the permanent whole life and universal life policies. As the Izzos' children mature into responsible adults and their retirement planning and other financial goals are achieved they can relinquish the universal life policies knowing that the permanent whole life policies that they each purchased many years ago will help them to offset estate taxes and leave a legacy to their children.

Laddering your life insurance coverage can help provide the protection you need for your family while providing you with the financial flexibility you want to help meet your financial and personal goals.

Kelby Gelston is an associate of FranklinMorris, Coordinating Broker for the Bar Associations Insurance Agency, Inc. For more information on the insurance benefits available to MSBA members, visit

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Publications : Bar Bulletin: March 2006

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