Life Insurance

Why do I need Life Insurance?

Life insurance policies are generally divided into two main categories: term life and permanent life insurance, with permanent having a number of different types. The key differences lie in how long the policy lasts, how it builds value, and the cost.

To decide which type of policy is right for you, consider your budget, the length of time you need coverage, and whether you want a policy that builds cash value.

Life insurance is primarily used to provide financial protection for your loved ones if you pass away. A tax-free cash payment, known as the death benefit, helps your beneficiaries cover expenses and replace your income, ensuring their financial stability during a difficult time.

Some of the key reasons to get life insurance are…

1. To replace lost income If your family relies on your income, life insurance can serve as a financial safety net. The death benefit can help your loved ones pay for essential expenses like food, utility bills, and daily needs

2. To cover final expenses The cost of funeral and burial services can be a significant financial burden. A life insurance policy ensures that your family has the funds to pay for these costs, as well as any outstanding medical bills and other unpaid obligations.

3. To pay off debts

The death benefit can be used to pay off debts, such as a mortgage, car loan, student loans, or credit card debt. This prevents your loved ones from inheriting this financial burden. This is especially crucial for homeowners, as it can keep your family from having to sell the house.

4. To fund a child's education

Life insurance can provide the funds to cover future college tuition or other education-related expenses for your children.

5. To provide for a non-working spouse

If you have a stay-at-home spouse, a life insurance policy can cover the costs of services they provided, such as childcare, transportation, and household management.

6. For wealth-building and estate planning

Some forms of permanent life insurance, like whole or universal life, accumulate cash value over time. You can use this cash value during your lifetime to supplement retirement savings, provide funds for a down payment on a house, or cover other financial needs. It can also be used as a tool to transfer wealth to heirs or make a donation to a charity.

7. To protect a business

Life insurance can secure the future of a business, especially for business partners. A policy can help with succession planning or provide financial stability for the business in the event of a partner's death.

What kind of Life Insurance is the best fit for me?

Term Life Insurance

•Cost: It is generally more affordable than permanent life insurance because it only provides a death benefit if you pass away during the policy term.

•Cash Value: This type of policy does not have a cash value component. If you outlive the term, the policy expires, and there is no payout.

•Duration: Provides coverage for a specific period, such as 10, 20, or 30 years.

•Some Term policies will allow you to convert to Permanent within a specified amount of time, often without new underwriting or exams.

Permanent Life Insurance

Permanent life insurance provides lifelong coverage and includes a cash value component that grows over time. This cash value can be borrowed against or withdrawn. There are several types of permanent policies-

Whole Life

This is the most common type. Premiums and the death benefit are fixed for the life of the policy. The cash value grows at a guaranteed rate.

Variable Life

Variable Life insurance has a cash value that is invested in a selection of sub-accounts, similar to mutual funds. The cash value and death benefit can increase or decrease based on investment performance, making it riskier.

Universal Life

Universal Life offers more flexibility than Whole Life. You can adjust your premium payments and death benefit, within certain limits. The cash value growth can fluctuate based on market conditions, with a guaranteed minimum interest rate.