by: Aaron Whitaker
The need for life insurance is very real. Some people go through life trying their best not think about their passing, but telling themselves that if they do move on, that their debts will be someone else’s problem. Unfortunately, that someone else is most likely to be a loved one. Life insurance is a way to avoid leaving unpaid debts, and can even be used to ensure a future for those who are left behind.
Life Insurance –
Term, whole life, universal, what does it all mean? What are they for? Let’s start with term life insurance. Most commonly offered in a 10, 20, and 30 year terms, they are life policies that are in force over the course of 10, 20 or 30 years, respectively. Term policies accrue no cash value, so you are unable to take out loans against the policy. They are useful to cover debts that only exist for a period of time, such as mortgages and car loans. Or to make sure you have extra life insurance to put your kids through college, but not continue to pay for the extra coverage once they are beyond college age.
Whole life is exactly what it sounds like, life insurance for you up to age 106 (with most insurers). This kind of insurance offers several different types of payment options: pay premiums up to age 65, 10 pay, single premium and pay up to the policy principal (the amount that the policy is written for). Whole life insurance accrues cash value, meaning you can loan against it in a pinch. You would get a whole life policy to provide money for final expenses, remaining debts, inheritance, etc.
Universal life is a bit trickier. The policies are similar to whole life policies but differ in the following regard. Let’s visualize a bucket. When you pay your premium, you’re putting that money into the bucket. After a few years, you start to build up cash value. That cash value also goes into the bucket. If something were to come up and you had to cut cost somewhere in an emergency, you could actually forgo paying your premiums on a universal life policy, and the policy would draw the premium due from the extra cash value that is in the bucket. Once the cash value amount is no longer available, you would need to begin paying the minimum due again or risk the policy lapsing.
A universal life policy is great for anyone who values being able to make flexible payments on the policy. Pay more than the premium this year, pay a little under the next. There are also indexed universal life policies, but I will not be going over these today.
Not many people like thinking about it, but who can tell when they will punch out for the last time? Debts left behind can not only be crippling on top of the grief of those who are suffering a loss, but the weight the grief itself can be enough for some people to prevent them from working or carrying on with everyday life.
If you have children, then you may already be aware of what an untimely passing can do to a child. A drastic change in family income can result in being forced to move, that can mean changing schools and all that goes along it. When the children get older it could be not being able to provide the cost of college education or giving them financial assistance.
Life insurance is for what and who you leave behind. Live with peace of mind knowing that your debts will be paid and your loved ones financially secure. If you intend to make a lasting impact in your children’s lives, make sure you buy enough coverage to provide education and money for the family to continue on with the standard of living they are accustomed to.
The cost of life insurance is not hard to justify when held up next to what it provides. We don’t like to consider the worst case scenario, but the expert recommended 10 times your annual salary in coverage should at least help your family to continue on living their lives without scrabbling for funds.
LOCAL.FRIENDLY.INSURANCE www.WhitakerLaChance.com (269) 324-7700
About the author:
Aaron Whitaker joined Whitaker-LaChance in 2014 as a Personal Insurance Customer Service Representative. He brought with him extensive customer service experience from working in a retail professional camera store and computer electronic store for three years in Chicago. Aaron manages all personal insurance placement, marketing, account service and claim management. His expertise is in working with our clients to make sure their insurance program takes care of them through all the changes in life. Aaron is a graduate of Kalamazoo Home School Association and attended Columbia College in Chicago, where he studied Graphic Art Design. He is an avid photographer and enjoys fishing.