Before we jump into today’s topic of life insurance, here is a little Tidbit Tuesday tip: SAVE, SAVE, SAVE!
I encourage all people to save whether that is to have a medical savings account or just a savings account on the side that they put some cash into for medical expenses. Remember, sometimes it’s cheaper to be a cash pay patient than use insurance.
What I want to talk about this week is Life Insurance. Did you know that a lot of people do not have the right amount of life insurance? Some do not have any life insurance at all. So why is that important? Life Insurance is meant to help the people that are still here after you’re gone. If something were to happen to you, how would your family take care of expenses? Do you have small children? Do you want them to have a college fund? Do you want your spouse to have the house paid for? These are good questions that help me to help you determine the amount and type of Life Insurance that you need.
There are three main types of Life Insurance – whole life, universal life, and term. There are different products and tools within these that offer different ways to use life insurance.
Term life insurance is a policy in which the rate is set for a certain amount of time referred to as a term. That rate is locked in for that length of time, which means it’s the cheapest insurance you can get. If you purchase a 30-year term policy, your rate won’t change for 30 years. In the 31st year, however, your rate will increase based on your current age. That can be a huge jump.
As an example, recently, a policy come to term that a client had for 20 years. It went from $90 a month to about $1,100 The client wasn’t going to pay $1,100 a month, so we had to look for other options. Often term policies are used by people to ensure their house will be paid for in the event of one person passing away. The value of the home is the value of the policy, providing security that the house will be paid off. Another option for term life insurance is to use it for final expenses. Qualifying for life insurance can be a concern for many people, but oftentimes people with health conditions can qualify for term insurance, in small amounts.
The whole life is insurance that gets builds value over time. This is a good option for ensuring children and the policy can be converted to universal life when they turn 18.
Another tool within life insurance options is Universal Life. Why is Universal Life a great option? It can be used not only as a life insurance policy but it can always also be used as a means of retirement income. How does this work? Depending on the situation (and there are too many variables to discuss here in a blog), the basic ‘nuts and bolts’ is you get a policy at the face value of what you want it to be. And based on the amount you put into it, that amount is reinvested. Most of these policies have a floor, which means you can’t lose money. It’s a great investment tool, unlike a 401k or an IRA, where you could lose all your money. You can also draw the money you put in there out when you turn in the age predetermined on the policy. And the money you put in there on top of the insurance is nontaxable, or just taxed a little depending on the circumstances.
There are many options and scenarios for the best life insurance fit for your situation, so a longer conversation with me is needed. Please feel free to schedule an appointment with me on my website. My goal is for everyone to have some kind of life insurance so that when that time does come, your family is not stressed, and that they are taken care of.