Life insurance is a products that creates an immediate pool of money payable to selected beneficiaries in the case that the insured dies.
Life Insurance normally requires medical and financial underwriting along with an application and the process of getting of approved can sometime take several weeks depending on health and amount of coverage applied for.
There are many companies that offer life insurance and many types of products.
It is important when looking for coverage that you understand the strength of the company that offers the policy and understand when and how the benefit is payable.
It is also important to understand what the guarantees are and see if the cost of insurance may increase over time.
What does it do for me?
Life insurance is most often purchased to replace income in the event of premature death so that surviving family member can continue having a similar lifestyle to what they had before.
While it can replace a person’s income it will also, due to the nature of how the product pays out, have the ability to instantly protect against true financial loss.
This is realized since spouse or other beneficiaries do not have to liquidate savings, investments or real estate in order to move on.
Another benefit of life insurance is the ability to utilize it as a transition asset for future generation.
Due to its tax advantaged pay out it can be a great tool to use when it comes to legacy planning and estate planning.
The preceding are truly benefits for surviving beneficiaries but there are also living benefits for the policy owner.
Having life insurance can be a great leverage tool that can be valuable when trying to obtain personal or business loans, applying for loans for college.
Certain products will also build up a cash value account within the policy that can be utilized as emergency savings, college planning and for other future financial goals.
Who should have it and why?
On order to determine type and amount of life insurance a more thorough fact-finding has to be done but we have put together a small list of different stages of life and why and how the product fits into each stage.
- Planning for the future can never start too early and expenses such as college tuition and down payment for a house are right around the corner.
- Gifting life insurance to a child or young individual can transfer values through a sound savings base.
- It does also lock in future insurability of the child.
Couples in early stages of life
- Providing income replacement in case something would happen to an income earner and potentially using a life insurance product for savings. If cash flow is tight there are many types of products that can provide protection at an affordable price.
- This is very often a time where income is peaking and retirement is becoming a bigger and bigger part of the financial planning process. At this stage having the protection replaces current income, creates net worth for legacy and depending on
- At this stage having the protection replaces current income, creates net worth for legacy and depending on type of policy it can help build tax efficient savings.
- Life insurance can also come with riders that can add additional benefits such as long-term care protection.
- Very often legacy and transfer of wealth is a concern and with the right setup and the right product transfer of wealth can be accomplished in an efficient and effective way.
- Life insurance isn’t just aimed for one type of individual– there are many designs and strategies available- including products to fit every need and budget.