Should I buy Life Insurance?
The subject of purchasing Life Insurance when you’re young sounds a bit morbid when you think of it as a contract to die. But if you really sit down and think about its components, you’ll begin to see the bigger picture.
First of all, it’s not just money for your family when you die. Yes, it is the main purpose behind it but there are many other ways to use Life Insurance when you’re alive.
There are different types of Life Insurance products based on the individuals needs. I’m only going to scratch the surface and explain 2 of the most common types and uses.
Term Life has a set period the policy is in force and expires if you don’t die by the expiration of the policy. It is the cheapest form of protection for your family but you’re limited in what you can actually do with it. Plus, all the premiums you’ve paid into it for the term of the policy is lost at the end of the contract. This type of insurance is good for families with lower incomes and can’t afford to pay for the fancier policies but still have the financial payout if you expire before the policy does. The “Face Value” or “Death Benefit” of the policy would cover any expenses your family needs to take care of after you pass.
A Permanent Life policy is more expensive however, has many other features built in that you can use while you’re alive. For example, your Permanent life or better known as Whole Life policy has something called a “Cash Value”. That is the cash available for you to accumulate over time at a much higher interest rate than any bank could ever give you. This cash is available to you to draw from as a loan against your policy. In the event you need some emergency cash, you can take it out without any penalty Tax Free. You don’t even have to pat it back because it’s your money, but there are some stipulations if you did decide that you didn’t want to pay it back. The main stipulation is that the amount owed from the loan plus whatever interest it would have earned would be deducted from the Face amount. That’s still not too bad considering that the face value is almost always greater than the cash value anyway.
An example of the last scenario is, let’s say you had a $100,000 Face value or Death benefit with a cash value of $20,000 earning 5% interest, that you borrowed because you had a medical bill you needed to pay. If you didn’t pay back the loan before you pass, your family or the “Beneficiary” would receive $80,000 minus approximately $1000 (the interest the insurance company would have earned from the $20,000) giving your beneficiary $79,000 usually paid out as a lump sum, Tax Free.
Also, with a Permanent life policy, you can use it in the event of an illness or disability that keeps you from working. You can receive benefits from your policy for the time you’re out of work. And with an accelerated benefits rider, you can actually receive your “Face Value” or Death Benefit” before you pass, provided that you have some sort of terminal illness. That would really help you out to get your affairs in order and to make sure your family is left with no burden when you pass.
Can you do that with your 401k’s or IRA’s?
When used correctly, a Life Insurance policy can be used as a retirement vehicle and reap the rewards of your hard earned dollars Tax Free.
Remember, you don’t have to die to use the benefit of Life Insurance. So if you’re young, single, have no children or a mortgage, the last thing on your mind would be to prepare for your death, but if you put all the pieces together and speak to the right agent that can help you put together the right plan for you, by the time you get to do all the things I just mentioned, you’ll be far ahead of most of the population and have already built a future nest egg to be used for whatever you want when needed.
If you are in the market for a Life agent that can tailor your plan and design the perfect plan for you, use the contact link above and I’ll be more than happy to assist you.