- Posted by Canopy KC
- On March 11, 2016
- 0 Comments
A basic financial portfolio should include your 401(k), Roth IRA, miscellaneous investments, health insurance and life insurance, even at 25 years old. Life insurance has four overarching categories and there is much more to life insurance than death. In fact, life insurance has several living benefits that if you take advantage of when you are healthy and young, your 40+ self will thank you. Trust us, you’re never too young to buy life insurance.
There is not a federal law that prohibits any individual from purchasing life insurance, yet it is often overlooked when mapping out your financial portfolio. The younger you are, the healthier you are (most likely) which equates to a more affordable premium that will be locked in for the duration. Life insurance in the most basic definition is the protection for your family who rely on your income. It will be utilized after you pass on to subsidize their financial needs as well as pay for funeral or legal expenses. Your parents, siblings and extended family can also use your life insurance to pay for end of life expenses.
Coverage Types: There are four main types of life insurance and understanding what you need in the coverage will assist you in determining which one you should invest in.
Term Life Insurance: Applies coverage for the term you select
*Term: 10 years, 20 years, OR 30 years
*Benefit: The key to your dependents receiving this benefit is death within the term you selected. There is an opportunity to renew, typically at a higher premium, but if you choose not to renew or you die (and didn’t renew) there is no payout or cash value to what you have already invested.
* Premium: Variable but is fixed (initially) and is typically less than other types of coverage.
Whole Life Insurance: Applies coverage for your whole life with an investment fund.
*Term: Duration of your life
*Benefit: There are two benefits; (1.) Death benefit that pays a fixed amount upon your death and (2.) You can borrow against the cash value that has accumulated without being taxed.
*Premium: Fixed, and a piece of your premium is invested by the insurance company to build cash value.
Universal Life: Applies coverage for your whole life with a money market (type) investment fund.
*Term: Duration of your life
* Benefit: Generally speaking, it is the same as whole life coverage with a market rate of return for the cash out option.
Final Expense: Sometime considered, “Burial Expense”
*Term: Typically, this type of coverage is offered to individuals over 50.
*Benefit: Covers the costs related to end of life.
* Premium: Variable and is based on the death benefit value the policyholder has placed upon themselves, age, gender, and health. Once all of that is determined, the premium becomes fixed.
Life insurance is a key piece in securing your’s and your dependent’s financial future and which coverage you invest in should be suitable to your individual needs. Typically, purchasing life insurance while you are younger equals lower premiums. It will also contribute to your families financial protection. That’s why you’re never too young to buy life insurance.
Disclaimer: This content is considered to be brief for the nature of the content and should not substitute a consultation with a licensed insurance broker like those at Canopy.