One of the biggest things I learned in the military long ago was that proper prior planning prevents pitifully poor performance. I am astonished at the number of otherwise seemingly intelligent adults who do not have some amount of insurance, even if only enough to prevent placing the financial burden of paying for their funeral on their loved ones upon their death.
Life insurance comes in all shapes and sizes and there IS a plan available to satisfy everyone’s needs. Some plans are temporary; some plans are permanent. The younger one purchases coverage, the cheaper it will be. Today’s life insurance policies are no longer the “death” insurance policies of yesteryear. Many companies offer products with LIVING benefits – benefits that guard against the insured becoming chronically, critically or terminally ill at some point during their lifespan, and allow for the access to the majority of the death benefit while the insured is still alive.
Some will argue that they don’t have a “need” for life insurance, that they have the assets to cover the cost of a funeral. But I believe in the smartest use of money. If the average funeral in the US costs around $10,000 (and that’s if you die TODAY and doesn’t take into consideration rising costs and inflation), instead of having to drain an account of $10,000, or worse, having to sell off assets to come up with the cash, a Single Premium Whole Life policy typically delivers at least a 25% return on one’s money (depending on age). That’s an IMMEDIATE return! For example, with one of my carriers, a 65-year-old female non-tobacco user could “trade” a premium of $10,000 for an immediate death benefit of $18,552.88. A male of the same age would get $16,393.44. Throughout the life of their policy, they would still have access to 85% of the cash value of their initial deposit in case of emergency. The younger one does this, the greater the return – a 50 year-old would get $28,490.03 for the same $10,000.
My point is this: besides the obvious uses for life insurance, there are many other usage factors to think about.
Life insurance can be used for replacing a stream of income, providing heirs with liquidity when they need it most, replacing the value of an asset, paying estate taxes, maximizing your pension or Social Security benefits, funding college for the kids and grandkids, providing liquidity to an estate, buying out a business partner, protecting a business for the replacement value of a key employee, satisfying debt, funding charitable gifts, providing for a special needs child or adult, equalizing an inheritance, longevity planning, and balancing investment risk.
The key is speaking to a professional who is capable of helping you navigate the sometimes-choppy waters and educating yourself on how to utilize life insurance as a tool instead of looking at it as just another expense.