by Sherelyn J Schoch, President Yetter Insurance Agency, Inc.
You hear me talk about life insurance and post about life insurance many times. The truth is that no one wants to talk about life insurance or even think about life insurance. The need for life insurance means that someone you love is no longer with you. It’s a hard topic; I get it. But, instead of ignoring that elephant in the room, let’s take some time to face it head-on.
Life insurance, at its core, is a financial tool to protect those you love from monetary hardship if you have passed away. If there are people in your life who count on you and your ability to bring home a paycheck, you need life insurance. Life after a loss is already difficult. Our family saw this firsthand this year after losing two special people. The loss was not compounded by financial struggles since both ladies had life insurance in place to help their families. Life insurance helps ensure that your loved ones are in a good place financially to pay for funeral expenses, uncovered medical expenses, everyday living expenses, mortgage and debt expenses, college tuition, or other essential costs. It is also an excellent way to plan your legacy for your children and grandchildren.
Who needs life insurance?
I argue that everyone needs life insurance. Whether you are married or single, parents of young children or empty nesters, stay-at-home parents or retirees. We took out life insurance on our sons when they were young and then added some more when they went to college. The loss of either your income or “non-paid” ways that you support your family can be devastating. For instance, a young family ought to think about getting life insurance for the breadwinner and for the stay-at-home parent (whose skills and support can be costly to replicate). Life insurance helps to bridge that gap financially.
What are the different types of life insurance?
Life insurance falls into two basic categories – term life insurance or permanent life insurance.
Term life insurance provides protection at a level premium for a certain period of time (term). When that term is over, the insurance either has a rate increase or ceases operation. The benefit of term life insurance is that it often provides the lowest initial premium. It is beneficial to those who are starting out as parents – they need a higher life insurance benefit for a lower cost as they are raising their kids and paying a mortgage.
Permanent life insurance provides protection for your lifetime as long as you pay the premium. This type of protection often has a higher premium due to the cash value accumulating over time (often tax-deferred). This cash value is beneficial as you can tap into it to buy a home, supplement retirement income, or cover emergency expenses. There are often two different types of permanent life insurance – whole life and universal life insurance. Each type provides protection and should be thoroughly discussed with your insurance agent.
I often recommend that people get a combination of term and whole life protection. If you have a mortgage, kids, etc…you will need a higher death benefit amount in the early years of your family that can be obtained with term insurance. If you still want to have coverage after your term, the whole life policy will remain in force after the term insurance policy expires (as long as the premiums are paid). Remember, life insurance gets more expensive as we age.
Hope this helps!