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LIFE INSURANCE 101

LIFE INSURANCE 101

“Fun is like life insurance; the older you get, the more it costs.” – Frank McKinney Hubbard

We’ve been reflecting on life insurance lately, especially after the recent Life Insurance Awareness Month campaign led by nonprofit organization, Life Happens. We understand that, on the boredom scale, the topic of life insurance is probably more aligned with watching paint dry than going skydiving. But thrilling or not, if someone will suffer financially when you die, then you need life insurance.

THE BASICS OF LIFE INSURANCE

The first thing most people ask is, why do I need it? Here’s the quick answer: Having life insurance guarantees a cash payout to your financial dependents in the event of your death. In other words, you will have reassurance that your loved ones will be protected – even after you’re gone. Life insurance proceeds can:

  • Pay for funeral costs
  • Help cover living expenses and pay the bills (utilities, transportation, housing, food)
  • Pay off existing debt (credit cards, mortgage)
  • Finance future needs for your family (college, retirement)
  • Continue a family business
HOW DO I KNOW WHAT KIND OF POLICY TO GET?

Term or Perm? That is the question! The most important thing to remember, regardless of the type of policy, is that each family has different needs, values and finances – all of which contribute to finding the policy that is most right for you.

Term policies:

  • Provide money to your beneficiaries in the event of your death for a set amount of time
  • Focus on affordability and value
  • Offer temporary protection (for example, to cover a mortgage or business loan, or until children are finished school)
  • Can potentially be converted to a permanent policy in the future

 

Permanent policies:

  • Provide money to your beneficiaries in the event of your death for your entire life
  • Have a savings component that can grow cash value
  • Offer an innovative way to save for retirement or to more effectively meet estate planning needs
  • Increase your death benefit over time to keep pace with inflation
DO PARENTS NEED LIFE INSURANCE?

Absolutely. If you’re married with kids, it’s likely that your income significantly contributes to your family’s finances. If you died suddenly, would your family be able to continue their standard of living while meeting financial obligations? As a single parent, you have the added responsibility of being the breadwinner, caregiver and more. Life insurance provides a safeguard for your children’s futures.

Stay-at-home parents may not be earning an income, but you manage the household (cooking, cleaning and transportation, for example). Should you no longer be able to make these vital contributions, life insurance would ensure that your family can afford to maintain their quality of life.

I’M SINGLE – DO I STILL NEED LIFE INSURANCE?

While the assumption is that people without kids don’t need life insurance, that’s not always accurate. Those who are providing financial support to elderly parents or caring for a sibling or other family member with special needs, for example, would benefit from life insurance, 100%. Those carrying debt should also consider life insurance, or that debt becomes the last thing left behind for living family members.

I’M YOUNG AND HEALTHY – WHY NOT WAIT UNTIL I’M OLDER TO BUY IN?

Your insurability is actually at its peak while you’re young and healthy. Combined with a good family history, being young and healthy earns you the best rates on life insurance.

 

The best way to figure out which type of policy is right for you and your family is to speak with an agent who can help identify your needs and create a plan suited specifically to you. Contact Allan Madonik, founder of Blue SWAN Financial today and start protecting your loved ones.

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