You Are Not Here Forever
Let’s talk about an important topic which is Life Insurance.
I have been thinking about this lately. I have taken care of my parent’s financials getting everything lined up and up to date. Then we had the passing of the matriarch of our family, my wonderful Grandmother. My husband and I have life insurance through both of our employers but that is not guaranteed. You can lose your job in a instance and you are no
longer covered. We have talked about it, but we put it on the back burner every time. With the recent passing of Chadwick Boseman, it made me realize we need to stop playing around and get our insurance together. Since we are trying to do better, I want you to do better as well.
What Types of Life Insurances are out there?
Term Life is more affordable between the two options. This insurance lasts for a period of time (1-40 years) and will expire at the end of the period or upon you death. The amount selected by you known as the death benefit is paid to your beneficiaries.
“Term life is considered the simplest, most accessible insurance policy. When you make your payments (known as your premium), you’re paying for the death benefit that goes to your beneficiaries in the event of your death. The death benefit can be paid out as a lump sum, a monthly payment, or an annuity. Most people elect to receive their death benefit as a lump sum.”
Whole life is more expensive than your term life as it considered permanent and does not expire. The Whole Life has two aspects of this which is the death benefit and a cash-value that is included in the policy.
“The cash value accrues interest at a predetermined fixed rate. Each month, a certain portion of your premium will go into the cash value of the policy, which offers a guaranteed rate of return (the exact amount that goes into savings is determined by your individual policy). The policy's cash value grows over time.”
There are several different options under whole life but wanted to give a high level summary of whole life insurance.
How Much Should I Get?
You will see different figures on this, but they say you should have 10-12 years of your income as your death benefit. This will assists your family with the missing income once you pass. You want your family to continue to be able live on without your presence. Here is a link to Bankrate’s calculator to assist you with your calculation: Life Insurance Calculator.
Which One Should I Get?
This part is totally up to you to research and decide but from Financial Guru David Ramsey he recommends going for term life.
“with the whole life, cash value option, he’ll pay a hefty monthly premium. And the part of his premium that isn’t going towards actually insuring him, goes towards his cash value “investment,” right? Well you’d think, but then come the fees and expenses . . . That additional $82 per month disappears into commissions and expenses for the first three years. After that, the cash value portion will average a low return per year compared to if he’d invested it elsewhere. Worse yet, the savings he does manage to build up after being ripped off for 20 years won’t even go to his family when he passes away. Greg would have needed to withdraw and spend that cash value while he was still alive. Talk about pressure! The only benefit his family will receive is the face value of the policy, which was $125,000 in our example.”
If you are able to live to your golden years, we are hoping you have adopted MyFondi's philosophies and you are:
2) Large amount in your emergency fund; and
3) Significant retirement fund
Out here living your best life. Even with your term insurance expiring, you will be able to afford everything upon your death.
Start doing your research today!
Summary and References