This year, COVID-19 has certainly increased awareness of the fragility of life and how easily our financial stability can be affected by forces outside of our control.
Life Insurance Awareness month is all about helping folks become aware of ways in which they can take back some of that control.
For those of us in the financial and life insurance business, this is at the core of what we do.
It is our job to inspire people to make important and informed decisions about their future.
Not just in September, but every single day.
In honor of #LIAM20, here are some life insurance basics to help get you started:
Why is life insurance worth it?
Life Insurance is important because it is the simple solution to a very challenging problem: What will happen to my family financially if something happens to me?
Life insurance provides you with peace of mind knowing that your family will have the financial means necessary to continue to thrive if you’re not there to support them.
For some, this is all the reason they need to justify life insurance.
Our family is more than just an important thing, it’s everything.
What are the different types of life insurance?
Term Life Insurance
Term life insurance provides coverage for a certain period of time (the term). Often 10, 20 or even 30 years. Typically, the longer the term, the more expensive the policy.
These policies are often less expensive than their permanent counterparts given that after the term has expired, you will need to either renew your policy or go without coverage.
Consider a 40-year-old man who takes out a 20-year term policy. If he is in good health at the time he takes out his policy, he can expect to pay around $25-$30 a month for $250,000 in coverage.*
This means if something were to happen to him within the 20-year term, his family would receive a lump sum, tax-free payment of $250,000 from the insurance company.
This makes a term policy a very attractive option for younger people with families that are strictly looking for a death benefit.
Permanent Life Insurance
For those folks looking for more than just a death benefit, a permanent policy can offer many enhanced features that can not only provide protection for your family but also serve as a powerful financial tool.
Permanent policies, as their name implies, remain in force for the rest of your life (as long as your premiums are paid). When compared to a term policy, permanent policies are often more expensive, however, there is one major difference.
With a term policy, every premium payment you make goes directly to the insurance company. A permanent policy is different in that it builds cash value that you can use for whatever you want. This is in addition to your death benefit.
Let’s take the same 40-year-old man looking for $250,000 in coverage. If he were to take out a permanent policy, he can expect to pay close to $300 per month depending on the carrier and other factors.*
This may sound like a lot of money to pay each month for the same amount of coverage, however, consider that at age 65, he will have accumulated over $160,000 in cash value.**
This is in addition to his $250,000 death benefit. He will be able to access $160,000 in tax-free cash value that he can spend however he likes. This is what makes permanent life insurance a very powerful financial tool.
Many folks use this type of policy as a retirement vehicle that allows them to save for retirement inside of their policy where their money can grow tax-free and their distributions in retirement are also tax-free.
Others have used this method successfully to pay for their children’s college, to fund a business, to make large purchases, and many other financial needs.
Do I need life insurance?
Great question. The answer is not everyone does. Ask yourself this question: “Is there someone that would suffer financially if I died?” If you answered “Yes”, then you definitely need life insurance.
What do I need to do next?
Now that you understand the need for life insurance and the importance of providing ongoing financial support for your family after you’re gone, what should you do next? This is actually the easy part.
At Focus Financial Group we have been helping folks protect their families and plan for their financial future for over 25 years. We will sit down and go over your financial goals and can provide you with insurance and investment options that are designed to meet your specific needs.
We understand that these decisions shouldn’t be taken lightly and that’s why we go out of our way to provide you with the information you need so you can make an informed decision.
There are many ways that you can fit life insurance into your financial picture. Whether it’s a term policy to protect your family now, or a permanent policy to protect your future, we can help. Contact us today and let’s have a conversation about you.
*The examples in this article are for illustration purposes only and are not meant to be a reflection of actual premiums, policy performance, or insurance quotes. These premiums do not represent an offer for insurance.
**Your policy’s performance will depend on many factors including interest rates, market performance, caps, insurance company and other factors. For a complete and accurate illustration, speak to your licensed insurance professional.
