Life insurance is an important component of any sound financial plan. It covers the life of the insured and provides financial protection for the policy's named beneficiaries. If you have a family or own your practice, you probably need the protection that life insurance offers.
There are two basic types of life insurance to consider: term and permanent.
If you are just starting to practice and your cash flow is low or unpredictable, you might choose a term policy. This coverage provides a level face amount (death benefit) that does not decrease over time. It is an affordable coverage for a specific length of time.
If you are an established dentist, permanent life insurance may be more appropriate for your situation. There are several types of permanent insurance, such as:
- Whole Life Insurance – fixed premiums, guaranteed death benefit and cash value growh
- Universal Life Insurance – flexibility to change payments, premiums and death benefit options
- Variable Universal Life Insurance – flexibility to change payments, premiums and death benefit options. This insurance also provides the options to take investment risks in return for a potentially higher cash value.
There are certain endorsements to consider as well, such as waiver of premium. (If you become disabled, your premium is waived.) Accidental death and dismemberment is another "add–on" endorsement that provides payment if there is a loss of life, hearing, sight or paralysis.
Critical Illness coverage can be added to some life policies. It provides the insured with coverage if diagnosed with a critical health problem such as cancer, heart attack, major organ failure, stroke and others. The policy pays the insured the face amount after the diagnosis is made and, like disability coverage, the insured doesn't have to die to collect the benefit.
If you own your practice or work in a partnership, life insurance may be important for business continuity and succession planning. You life insurance agent can discuss what best meets your needs. Some options, depending on the situation, are:
- Key person insurance – This insures individuals who are instrumental to your practice.
- Buy-sell agreement – This enables a surviving business owner to purchase the deceased owner's share of the business with life insurance proceeds.