Whole Again

Why is life insurance so important for families?

There may be no better motivation for purchasing life insurance than protecting family and loved ones. Most young married couples begin accumulating debt while building the family. Cars are purchased, a home is purchased, mouths to feed, clothes to buy and daycare bills consume the weekly paycheck. A life insurance purchase is also “event driven” in that things that happen around us cause us to think about what happens if I die with all the debt I’ve accumulated? The risk is real, no doubt about it. For this reason, we eventually look for a solution to this ever present need for our families. When a friend, business associate, or close family member dies early in life, those around him or her will witness the financial calamity that ensues. This event will be the trigger to pay closer attention to life insurance advertising and finally make the decision to take this “what If” seriously. Circumstances will need to be addressed:

loss of all or a portion of the family income
the mortgage payments
the car payments
savings for college education
funeral & burial expenses
final health care expenses
daily living expenses
taxes

All of these items will need to be considered when determining the amount of insurance needed to make the family whole again. Insurance experts use a “needs analysis” to determine the amount of insurance that is required to finance the existing and future needs of surviving loved ones. Seeking out a reputable and qualified agent is the first step in putting one’s mind at ease. The insurance professional has a duty to identify the needs and present an affordable solution based on the needs analysis. There are different types of insurance products that can be used to deliver the amount of cash needed, some are permanent and some are not. Purchasing a permanent insurance product for a very large risk can be too expensive for most families so other less-costly products must be mixed in to accommodate the family budget. Also, the life insurance plans need to be re-visited every couple of years so they can be modified to accommodate an increase or decrease in the “needs analysis” which remains fluid throughout one’s lifetime. The reputable and experienced agent understands that there is no “one size fits all” solution and will remain in contact with the client to offer solution for life’s changes.

What are the differences between the types of life insurance policies?

Term life

Although Term Life Insurance remains the most economical approach to the solution, it will not be the best solution for the need of the family. In most cases, the term policy will expire (the policy is out lived) and the insured will have to renew at a much higher rate. If the new rate is unaffordable changes will have to be made and underwriting steps will be ordered by the insurance company. The result can become a major problem if the health of the insured has deteriorated.

Variable (Universal) Life

Variable Life is a great product priced somewhat higher then Term Life, but if funded properly can become permanent. This product also builds cash value that can be accessed in the later years for a financial emergency or assist in funding a college education. The policy is flexible so the face amount can be changed as the need is reduced resulting in lowering the monthly premium. This product can be purchased on a fixed or variable basis depending on the needs of the policyholder. It also allows for child term riders (to cover the children) and additional insured (adding a second insured) at a lower rate than having multiple policies.

Whole life

Whole Life Insurance is used as the standard method for insuring final expense costs. Although priced somewhat higher than Term and Universal Life, the policy is guaranteed to stay in force for the life of the insured as long as the premium is paid. The agent using this product for final expense must also take into consideration the rising costs of funerals when recommending a face amount to purchase. Funerals are now expected to double in cost every 10 to 15 years.

The bad news is that there is always the ever present danger of financial devastation resulting from the death of the family earner(s). The good news is that there is an affordable way to make the family whole again by using the various types of life insurance to transfer the risk to a reputable and highly rated insurance company. Knowing this, do not hang up or give an agent grief when they are merely trying to help you identify the need for their product.