The idea of using life insurance to solve financial problems after death is almost as old as the hills. People have a tendency to approach this in a manner that can be described as too casual at times.
Sometimes sufficient thought is not given to the impact on the family if the breadwinner, or breadwinners, do not own sufficient life coverage to replace their incomes after death. It may be that people are so afraid of death that they develop some type of mental block.
Life Insurance solves many Financial problems
I have spent over 40 years in this business and I have seen families in pure panic after the death of their father and husband. On the other hand I have seen a wife bury her husband with such dignity and an open expression of love and respect for him that there are no words to sufficiently describe it. He left his wife and his children financially secure for the rest of their lives.They could continue living in the same house. The children could continue going to the same school, they could continue their same extra curricular activities, they continued wearing nice clothing. Money was available for college.
All of these things guaranteed because the husband and father took the time to prepare for death. There was sufficient income for the wife he loved so deeply to live out her days very comfortably. The policy didn't replace the husband but it kind of made him immortal in a way.All this may sound like a fairy tale to many but ask any insurance agent who has been in this business for many years. Sometimes the beauty of the thing brings you to tears.How can the average person do the same for their families. You first must decide how much insurance you need ...then start off with term insurance.
The reason I recommend this is not that I have any great bias against permanent insurance but term insurance is simply cheaper. Most people cannot afford permanent insurance at the outset.
I Suggest the 20 year term and the 30 year term policies. As you progress you can convert your policies, if you choose, to something like a universal life policy which allows for flexibility in premium payment as well as death benefit amount.
Term of Life Insurance
Term life insurance is designed to provide financial protection for a specific period of time, such as 10 or 20 years. With traditional term insurance, the premium payment amount stays the same for the coverage period you select. After that period, policies may offer continued coverage, usually at a substantially higher premium payment rate. Term life insurance is generally less expensive than permanent life insurance.
Term life insurance proceeds can be used to replace lost potential income during working years. This can provide a safety net for your beneficiaries and can also help ensure the family's financial goals will still be met—goals like paying off a mortgage, keeping a business running, and paying for college.It's important to note that, although term life can be used to replace lost potential income, life insurance benefits are paid at one time in a lump sum, not in regular payments like paychecks.
Universal Life Insurance
Universal life insurance is a type of permanent life insurance designed to provide lifetime coverage. Unlike whole life insurance, universal life insurance policies are flexible and may allow you to raise or lower your premium payment or coverage amounts throughout your lifetime. Additionally, due to its lifetime coverage, universal life typically has higher premium payments than term.
Needs it helps meet: Universal life insurance is most often used as part of a flexible estate planning strategy to help preserve wealth to be transferred to beneficiaries. Another common use is long term income replacement, where the need extends beyond working years. Some universal life insurance product designs focus on providing both death benefit coverage and building cash value while others focus on providing guaranteed death benefit coverage.
Whole Life Insurance
Whole life insurance is a type of permanent life insurance designed to provide lifetime coverage. Because of the lifetime coverage period, whole life usually has higher premium payments than term life. Policy premium payments are typically fixed, and, unlike term, whole life has a cash value, which functions as a savings component and may accumulate tax-deferred over time.
Needs it helps meet: Whole life can be used as an estate planning tool to help preserve the wealth you plan to transfer to your beneficiaries.
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