Serving you through Covid-19

bbb
Serving you through Covid-19

Estate Planning – What About Life Insurance?

Home

Estate Planning – What About Life Insurance?

Copyright 2006 Ronald Hudkins

Not too many years ago life insurance was considered to be the indispensable platform upon which all other estate planning efforts should be based. In fact, for those in the median and lower income ranges, it was often the only recognized method for protecting one’s heirs, particularly in the event of untimely death. However, over the past twenty or so years, the concept of financial planning has changed considerably. The proliferation of varied retirement plans available through work (IRAs, SEPs, SARSEPs, mutual funds, etc) has changed people’s perspectives about the need for life large life insurance policies.

Does that mean that you don’t need life insurance? No. Most people, perhaps with the exception of the very wealthy, do need some sort of life insurance, although even the very wealthy may opt for a life insurance policy (generally whole life) to defray the costs of burial and estate taxes.

In general, the options are whole life (also called permanent insurance) and term life, with variations like universal life or variable life that combine some of the benefits of each. Different companies offer different options, but which you need and how much you need are matters for heated debate. Those who sell one and make most of their commissions from it will vehemently try to convince you that the other is not a good investment. Here are some facts for your consideration.

Whole Life Insurance Advantages:
• Offers a guaranteed death benefit no matter how long you live
• Is generally not subject to rising premiums; rates stay the same
• Many policies become “paid up” at some point (15 years, age 65, etc.) after which no more premiums are paid
• Has investment value which can be cashed out after some specified interval
• Can be borrowed against in case of financial emergency
• Can, in many cases, occasionally earn dividends depending on the company’s solvency and accuracy in predicting actual costs
• The income from a whole life policy is tax deferred
• Can be cashed out after age 65 and used for retirement

Whole Life Insurance Disadvantages:
• Costs more than term life insurance
• Generally returns a fairly low rate of interest
• Does not begin to accumulate any real value for the first 10-15 years
• If the policy is surrendered within the first few years, money paid into it is lost
• Does not provide the investment value of a mutual fund or other investment

Term Life Advantages:
• Premiums are generally very inexpensive
• Lower premiums allow the buyer to purchase more insurance with higher death benefits
• Can be quite useful if the buyer only needs coverage for a specified period (while paying off the mortgage or while kids are in college, etc.)
• Leaves the buyer with more money to purchase other investment vehicles like mutual funds, stocks, bonds, etc. that provide higher rates of return than whole life
• Often beneficial for younger families who can’t afford whole life rates, but need to insure the primary income earner

Term Life Disadvantages:
• Only pays if and when you die; you can never personally recoup any of the money spent on term life insurance
• While premiums are lower than whole life, they also tend to go up and can become unaffordable
• Term life is only available for a specific term (up to 30 years), and then goes away; if you don’t die within the term, your premiums are lost

Almost everyone needs life insurance of one variety or the other. The type of insurance and the amount to purchase depend entirely upon you, your family and your mutual goals and needs. In any case, make sure the company you purchase insurance from is reputable and financially solvent. Don’t be convinced by a fast-talking sales person without doing your homework first. There are few remedies if your life insurance company dies before you do.

Break Out Your Bucket List And Put A Scare Into Your Term Life Insurance Company

Get your game on! You know you love adventure, excitement, and finding ways to get the best that you can out of life. So why not get the best that you can out of your term life insurance?

That’s right! You pay into your term life insurance on the chance that you will pass away before the term period ends, or at least after you make that first premium payment. The insurance company is betting that you will live throughout the entire term as they won’t have to shell out any money to your beneficiaries.

Take on that sucker bet while putting a scare into the insurance company by seeing who wins out. See if you will actually live throughout the life insurance term or if you will die and force the insurance company to pay the full death benefit by breaking out your coveted bucket list.

A bucket list is a list of all those activities, goals and dreams that you want to do before you die. It’s living life at its fullest by fulfilling every wish you have and experiencing every desire you have ever dreamed about.

Many people have a list of 101 things they want to do before they die. Some of the activities may involve extreme sports such as bungee jumping, skydiving, paragliding or climbing a mountain without a safety line. You can also have other activities such as running a marathon, learning to fly a plane, taking a hot-air balloon ride, traveling around the world or performing a humanitarian service.

Go out and do all the things that are on your bucket list as you bet against your life insurance policy. It’s a win-win situation for you. You will be enjoying your last days on earth by doing those things you always wanted to do. If you die from one of those activities, the insurance company loses the bet as your beneficiaries win the death benefits. If you survive during the entire time period of the term life insurance, you will have great stories to tell about all of your adventures.

Close Bitnami banner
Bitnami