Life insurance is designed to do one thing and that is to protect an individuals greatest asset; their Income.

Life insurance coverage is there to provide an income in the event of an untimely death to the wage earner or person’s responsible for paying the bills. It is also there to provide money for burial, final expenses, estate and other various taxes.

As we go through life we are all responsible to someone, some where along the way. By having life insurance in place it enables us to take care of those we are responsible to in the event that we are no longer living on this earth to take care of them.

Each one of us are essentially all just Money Machines for the people we take care of and ourselves. We create money on daily basis in one way or another and Life insurance is the Only replacement for THE Money Machine; there is nothing else that replaces it.

Some people have the good fortune and plans in place to save and properly invest so that if something were to happen they would have the money already there to take care of their loved ones. This is good but they still should have Life insurance in place so the estate doesn’t have to be liquidated in order to pay for burial, final expenses and taxes. No matter what happens these 3 things will have to be paid.

If the estate goes thru a liquidation process to pay for these 3 items it could also incur extra expenses for executing the estate. By liquidating the estate a beneficiary may not get all that the deceased person had intended to leave them. Death and taxes are the only sure things that will happen in life and Life insurance is there to handle both.

The best time to purchase Life insurance is early in life; the earlier the better. The cost of purchasing Life insurance goes up each year as people get older. Once a person hits their late 30’s it starts to get very expensive and some times due to health conditions they may not be able to get it.

Some people think that because they have Life insurance thru work that they are okay; this couldn’t be further from the truth. Once a person retires their life insurance typically goes away with the exception of a very few employers; Federal and State employees, Railroad Workers, Teachers and some military.

When a person does retire and tries to get Life insurance most are not able to get it due to being too expensive and unaffordable while on a fixed income or they simply may not get it due to health conditions. Not too many people at retirement age have good enough heath to purchase Life insurance affordably.

As you can see almost everyone needs to have coverage in place as soon as possible and therefore protecting their insurability for the future. It will be needed sooner or later and as the old saying goes; ”Pay us now or Pay us later” and usually if you pay later it will cost you a lot more.

There are basically 3 types of Life insurance; they are as follows:

? Term Life Insurance

This is the lowest cost life insurance when used for short term needs.

· Advantages

· You get higher coverage for a lower cost

· It is for a specified time period

· You can add riders to the policy

· It is convertible into a permanent policy

· Disadvantages

· There is no cash value to the policy

· The policy will eventually expire

· Level Term- for periods of 5, 10, 20, 30 years or decreasing over time. 

? Universal Life

§ Advantages

§ You are able to use the non-forfeiture features

§ You receive a guaranteed minimum interest rate on cash account

§ You may take loans from the cash account

§ You may use the cash to pay your premiums

§ You may use the cash value to buy extra life insurance

§ Disadvantages

§ Higher premium than term insurance

§ The Policy expires

There are 2 types of Universal Life insurance.

1. Traditional Universal Life which gets its rate of return thru investments that the Life insurance company makes on their own behalf and returning a portion of that back to the policy holder as their rate of return. This is a very safe way to grow the cash value in a Universal Life policy.

2. Variable Universal Life lets the policy holder choose which securities they want to put their money into in order for their cash value to grow. It is actually invested into the stock market thru various mutual funds or groups of mutual funds.

There is no guarantee on accounts that are placed thru securities and therefore there is much greater risk of losing the cash value. This also could cause the policy to lapse because there may not be enough money in the account to fund the cost of insurance as the cost of insurance goes up.

? Whole Life

§ Advantages

§ A permanent policy

§ You can use non-forfeiture features

§ It matures and pays the Face amount if you out live it

§ You earn at least 2% rate of return on cash account

§ Your premium stays the same

§ Use the paid up addition feature

§ Automatic premium loans

§ Disadvantages

§ Most expensive Life insurance

§ Low interest rate on cash account

§ Lower face amounts

Note:

Term should be used for short term debt typically less than 20 years.

Universal Life should be used for some one that wants to have a permanent program that affords them to purchase higher coverage’s.