There are those who wonder about life insurance-does it work? Similarly, others question if whole life insurance worth it. Others ponder about universal life insurance-does it work? Still others ask about term life insurance-does it work?
I will answer all the questions with more questions: What do you mean does it work or is it worth it? Shouldn’t the real question be do they work for you, if so how, and if not, why not?
Shall we have a look?
Life insurance-does it work?
Let’s start with the basics:
- All life insurance offers a tax-free death benefit
- The owner of a life insurance policy decides who gets the death benefit
- The person or entity that receives the death benefit is called a beneficiary
- The main purpose of a death benefit is to protect the beneficiary from financial hardship
- It is not death insurance
- Cost is based primarily on a person’s health and age in that order
- Not everyone qualifies
- There will only be one claim per policy per person-we are all going to die someday
- There are two main types: Temporary and permanent
Is there anyone in your life who would suffer a financial loss when you die? Does it make sense that when you die there will be enough money to pay your final expenses, such as burial, medical bills, and debts? Does it make sense that when you die, especially if it’s unexpected and untimely that your family, loved ones, and/or business have enough money to carry on?
If you answer yes to any of the above questions, life insurance probably works for you.
Is whole life insurance worth it?
Again I will answer with questions.
Do you want:
- To be insured the rest of your life?
- Your insurance premiums (what you pay) to be fixed and never increase?
- To be able to enjoy living benefits (cash value) as well as the death benefit?
- The amount of the cash value to be guaranteed and know exactly what it’s worth?
- To be able to sell the policy back to the company for its cash value?
- To be able to have access to the cash value any time you want or need it?
If you answered yes to any of the above questions, whole life may be a good fit for you.
Are there ways to earn better return on your money? There absolutely is.
What concerns you more, the return OF your money or the return ON your money?
How important is permanent protection to you?
How important is the word guarantee to you?
Universal life insurance-does it work?
More questions for you to ask yourself:
- Are you willing to take some risk that the cash value may not perform as planned?
- Do you want the flexibility of being able to manipulate the amount of your premiums?
- Are you OK with the fact there are more moving parts in UL than whole life (WL)?
- Do you want permanent insurance that you can purchase at a lower initial premium than WL?
If you answered yes to ALL the above questions and you want to be insured for the rest of your life, you may want to consider UL as an alternative to WL.
There are several kinds of UL. As long as you understand how it works, it can be a great tool to assist in long-term financial planning.
Both WL and UL can be very effective tools to supplement retirement planning, college planning, or as a supplemental employee benefit.
Term life insurance-does it work?
You guessed it. More questions:
- Did you know the word term is similar to the word lease?
- Did you know term insurance is the equivalent to renting your insurance?
- Do you want to be insured temporarily for a specified period of time?
- Are you willing to pay the higher premiums (sometimes exponentially higher) when the term expires?
- Do you want only a death benefit?
- Are you OK with knowing you will probably outlive your term?
- Did you know that less than 5% of all term policies never pay a death benefit because of the above?
- Is immediate cost of insurance your main concern?
If the answer to all the above questions is yes, a term policy may be what is best for you.
Similar to a lease-with-option to buy, some (not all) insurance companies offer the ability to convert from a term policy to a permanent (WL or UL) policy at a later date.
Last but not least
Did you know you can own more than one policy? Perhaps all the different kinds mentioned could work for you.
How much insurance do you need? To be adequately and fully insured, a guideline is to be insured for 10-15 times your annual income.
What will your budget allow? Start with that then decide how much of a death benefit you need, then decide if it’s whole life insurance, universal life insurance, or term life insurance that is best for your situation. Don’t forget. You don’t have to pick just one.
How often should you review your situation? It’s probably best to review at least once a year.
Are you and your family, loved ones, or business protected against financial hardship regardless of if you die too soon or live too long?
Do you have a guarantee you’ll still be here tomorrow?
If not, what are you waiting for?
How can I help?
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