Life insurance is the best way to get peace of mind, anywhere.
Think of it like this: If you own a home, you have a homeowners insurance policy, right? Of course you do. Why? Because the thought of something happening to your home and you not being able to repair or replace it would give you many sleepless nights.
Especially on those stormy, summer nights when the wind is blowing like crazy and the lightning is flashing all around you. But, you don’t have to worry, do you? NO! Because you’ve protected yourself from financial ruin with a homeowners insurance policy. (P.S. that’s why mortgage companies require you carry a homeowners policy to protect THEM from financial loss)
Now, even better than that is a life insurance policy. Whether it is a temporary policy (a.k.a. TERM) that lasts for a specified amount of time or a permanent policy that will be around as long as you are. Why? Because your family depends on your income to pay the bills and provide college, food, cars, clothing, vacations etc… and if something tragic happened to you, your properly designed life insurance policy would allow them to continue on in the lifestyle they are accustomed to. Now that’s peace of mind!
Now then, the question is do you have enough and the right kind of life insurance? As you will see below, if you owned $100,000 of life insurance in 1985, to provide the equivalent amount of protection today, you would need $235,000 worth of protection. Below the chart I will go more in depth of the types and reasons behind the different life insurance available.
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Let’s look at the term life insurance type first. It is usually owned to cover a certain need like:
- a car loan
- or to insure that your children could attend college
After the need for protection is over (i.e. the loan is paid off or the kids have graduated), you can cancel the policy. However, you will always want at least a small permanent policy to provide the funds to cover the final expenses of you becoming an angel.
A term policy can be effective for as little as 1 year and up to 30 years. The premiums are usually the same for the entire life of the policy and only goes up when you want to renew. The premiums of a term life insurance policy are usually very affordable especially when we are young. As we get older, the rates will go up and at some point will be cost prohibitive.
Another type of life insurance is called permanent insurance and there are a couple of varieties of this.
The most well known and oldest (Ben Franklin reportedly had this type) is called a Whole Life insurance policy. The benefit and the premiums are usually fixed and most of these you pay for your whole life. Some of these can earn interest which results in “cash value” and this can be utilized for a variety of reasons.
There is another type called Universal Life Insurance and these are a little more flexible than the whole life. You can change the premium and the benefit amount up or down depending on the circumstance. In most cases, these also allow the policy to earn interest and with an Index Universal Life policy, you can really supercharge the savings. When you need or want to take some of the cash value out, you can do this as a loan and receive the income tax free! See here for a more in depth article about IUL and here for a fun, informative video.
Each type of life insurance has it’s worth and value and can be very appropriate when used in the right situation. A term insurance policy is not always the best, just as a permanent life insurance policy is not either, in every situation. The main point is to have some life insurance to protect you if something tragic happened. If all you can afford right now is a term policy, then get that and later we can look at getting into something more permanent.
So, how much do you have and is it the right type? Get with an insurance professional and they can review your assets and liabilities, your goals and dreams and help you determine what is the best course of action.
You need that peace of mind and your family deserves to be able to continue on and with a properly designed and planned life insurance policy, you both can get what you want.
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