Life Insurance
Why do I Need Life Insurance?
The most basic answer is this – security. A life insurance policy secures a death benefit payout that can be used to cover final expenses, help your beneficiaries address the financial impact of your loss, and transfer wealth. However, there are many benefits to some life insurance policies that go beyond the death benefit.
When you think about the future, what comes to mind? Maybe the long-term financial security of your loved ones is your top concern. A good life insurance policy can replace your earning power to provide that continued stability. Do you need a safety net in place for financial emergencies? Are you worried that your current savings won’t be enough for retirement? Maybe you want the freedom to invest or help cover tuition costs when your kids go to college.
Whatever concerns or goals you may have, a quality life insurance policy could be the solution.
What Type of Coverage Do I Need?
As an individual, you need a life insurance plan that matches your individual needs and goals. There are multiple options available and finding the right one can be tricky. At Reaves Financial, we feature two main types of life insurance, term life insurance and whole life insurance.
Term Life Insurance
Term Life Insurance provides temporary protection for the term of the policy. This type of coverage typically comes with a low initial premium, which remains level for the specified duration of the policy (e.g. 10, 20, or 30 years).
Most term life policies can be renewed (usually at a recalculated premium) or converted into permanent coverage if the policyholder outlives the duration of the term. These plans are well-suited to meet shorter-term, temporary needs but do not build any cash value.
Whole Life Insurance
Whole life insurance is a subset of permanent insurance, which, in contrast to term, provides coverage for a policyholder’s entire life. Not only does whole life insurance coverage span an individual’s life, it also features other benefits that may be appealing. For instance, whole life insurance policies generally feature:
Level Premiums - The amount you pay for coverage stays the same over the course of your life.
Tax-Deferred Cash Value Accumulation - Through a cash-value component, a whole life policy can accumulate tax-deferred value. There are many different ways interest can be calculated. The cash value component can be very attractive because it can a) grow the total death benefit amount passed to beneficiaries, and b) be accessed through policy loans or withdrawals. Some people use their whole life insurance policy as a source to cover emergencies or as supplemental retirement income.
When You Should Consider Purchasing Life Insurance or Review Your Current Coverage
Here are some instances when you should consider your life insurance needs.
- Major family changes (marriage, divorce, new child or grandchild)
- Purchased a new home or recently (within 6 months) refinanced home mortgage
- Change in health for you or your spouse
- Providing personal or financial care for an adult family member (parent, grandparent, etc.)
- Providing assistance or long-term care for child or grandchild
- Opened a new business or expanded upon an existing business
- You or your spouse received an inheritance or other large sum of money