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DEAD OR ALIVE THE CASE FOR LIFE INSURANCE

Like the old adage says, don’t put off tomorrow what you can do today. The sooner you get life insurance, the cheaper it is. Some people believe they can buy life insurance whenever, however, it’s not that simple. Life Insurance coverage is based on two things, age and health. The younger you are and the healthier you are, the cheaper it is; and you have a better chance of getting approved. So don't procrastinate, take action today.

Reason #1: Protection

If you have a family or people who depend on you financially then life insurance is a must. Life Insurance is a tool that replaces income when the death of a loved one occurs. This is important for young parents of young children. You have to think ahead and ask yourself this question, what happens if the unfortunate death of my spouse occurs and my household income goes down from two to one? Let’s say for example both couples make 50K a year bringing the total household income to 100K.


If one spouse dies, and that couple has a 1-million-dollar life insurance policy in place. If properly managed for the next 20 years that living spouse has the option to make one withdrawal per year of 50k from that $1 million dollar Death Benefit. Keep in mind, life Insurance policies pay 1 lump sum payment. It is vital that money management is implemented. If you know you don’t have great money management skills, then it might be best to get a financial advisor to guide you. This is a harsh reality but it’s a true reality, and if you don’t have the proper insurance in place not only will you be grieving, but you will bear the financial strain. Life insurance should be the cornerstone of every family’s financial house.


2. Eliminate Debt: You need a protection mechanism from Debt. You don’t want your spouse or any other family members to be left with any extra financial burden in addition to the emotional burden they are already dealing with. Having a Life Insurance Policy protects them from any additional costs like any outstanding debts, such as mortgage, credit cards and car loans.


3.Used as a tax-free savings account: Life Insurance has multiple usages other than being a death benefit. It can be used to protect key business partners, mortgages or a guaranteed interest savings account. For the sake of this article, we will be discussing the Cash Flow element of a life insurance policy. This type of Insurance that has a cash value component is called a Whole Life policy. Other cash value polices are Variable Universal Life (Investment/market based) or Universal Life. It is known to be more costly than a basic term policy, but when designed properly, this policy can generate some serious cash flow.


This is truly a policy for the living and Big corporations such as banks. Banks use life insurance policies for cash reserves to grow their money instead of it sitting still letting inflation eat the value away. Cash Value insurance policies require a fixed level premium payment, of which a portion is allocated to the cost of insurance and the remaining deposited into a cash value account. These policies still operate like a life insurance policy which offers a death benefit but the IRS has a tax code 7702, allows this to act as a tax-free vehicle. Allowing individuals to use this as extra tax-free income for their future. Borrowers of the policy have the option to pay the money back into the policy or have the amount borrowed deducted from the Death Benefit.


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