Life Insurance Blog

What do I need life insurance for?
April 7th, 2009
in Life Insurance

When talking to clients it is always important to assess what they need life insurance for.  They will tell us they need life insurance for everything from income replacement, mortgage protection, burial expenses, to supplemental retirement income.   It is important to assess to make sure that they meet their most important needs with the insurance they have.   Ideally, we would like them to meet every need that they have, but sometimes this is not realistic.   For example, they only have 100 dollars a month budgeted for life insurance and can only cover income replacement, mortgage protection, college education protection, and burial expenses.  They don’t have enough money allocated at this point to do anything other than term life insurance and create supplemental retirement income.   This is a great outcome though, as we were able to protect all of their main liabilities.   The protection is the most important thing here.   Term is a great option for a modest budget as it allows the most protection immediately for the smallest amount of money.

For a single client, they may feel they need life insurance for a totally different reason.  For example, they are thinking more in terms of accumulating money and less about death benefit.  They do believe one day they will want the death benefit when they have a family.  For the client to buy a permanent life insurance policy (whole life, or universal life) at this point and overfund it, can be a great idea.  They can grow the money within the policy tax deferred and access money along the way with no penalty and tax-free.  It is an opportunity to create another pool of money that can be used for retirement, that has better tax treatment than a 401k.

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