I’d like to talk a little about something no one wants to talk about – Life Insurance! No one wants to think about dying, but if something happens, life insurance can help replace you or your spouse’s wages (or both) if something happens.
There are two main types of life insurance; whole life insurance (I am including universal life and all other investment vehicle insurance here) and term insurance. Basically whole life ties an investment with life insurance to calculate your premium that stays the same up to 100 (assuming you keep it in force that long). You accumulate cash value along the way plus the protection of the insurance. Sometimes the insurance amount stays the same, other times it increases or decreases; this will change the cash value accordingly. You can borrow the cash value without cancelling the insurance. At 100 (assuming you live that long) you get cash value and face value back and the policy disappears. The problem is most policies guarantee only a small investment return and I have never liked tying an investment to buying life insurance. Term insurance is straight insurance that covers you or your spouse for a certain amount for a certain time (usually 5, 10 or 20 years). You pay for the insurance only and are covered for the term. If you need the insurance longer than the term, you will have to renew at a much higher price, so determining how long you need the insurance is important. Just remember that because of the investment component, whole life insurance is more expensive than term insurance. There is a saying “instead of buying whole life, buy term and invest the difference.” I like it for myself, but there can be reasons to pick whole life over term. Here is a link to an MSN article:
http://articles.moneycentral.msn.com/Insurance/InsureYourLife/TheRagingDebateOverTermvsWholeLife.aspx
The financial planners in the Resources section of my website https://briantstonercpa.com/Resources.html can help you find how much insurance you need and the type. Just remember if you want to provide for your family in case something happens life insurance is an important component.