What Kind of Life Insurance Should I Buy or Keep?
Most of us would agree that at different stages of life, we will most likely need some type of protection from the financial risk of dying, but how much should you own and what kind? And what about those older policies you own? Should you still keep them? Depending on your situation, it can get complex, so a good place to start is to explore the main purpose of insurance.
At its heart, buying life insurance is simply a way to manage risk and protect against catastrophic financial loss. In this case, you will need to define and quantify the risks in your life and decide how much you can absorb, and how much you would like to pass onto an insurance company. A good insurance professional or financial planner can help you determine the optimal amount for your personal situation. The last thing you want is to be underinsured, but you also don’t want to pay for insurance you don’t need either.
After determining the amount of life insurance you may need, you have to decide what kind to buy. Although there are several policy types available, such as term life, whole life, variable life, and universal life, among others, with numerous options, it really comes down to buying permanent and/or temporary insurance. As long as premiums are paid, a permanent policy may not expire and will payout a death benefit to your beneficiaries whether you live to be 50 or 100! On the other hand, a temporary policy, or term life, has a stated end date, usually anywhere from 10-40 years, depending on the issuing company. Choosing between these two is not necessarily an either or situation. Depending on your age, family dynamics, and financial situation, one type or both may be used simultaneously.
Now what about those old term or permanent policies you already own? It’s easy to stick your policy in a drawer or file cabinet and forget about it, all the while paying the annual premiums, but too often, life insurance that was purchased in one stage of life will no longer fit for another stage. There’s a good chance your risks and financial resources have changed, and the policy may not be appropriate for your situation anymore. In fact, you may find that you don’t even need life insurance anymore! The key is assessing the policy in the context of your overall financial plan and looking closely at the policies you own, including the type, features or riders, costs, returns, and possible tax implications of ending the policy.
As part of our financial planning process, we assess your current risks and use a sophisticated modeling software to help determine the optimal amount of life insurance, if any, you should own.
If you’d like to walk through your personal situation please send us a message at email@example.com.
Until then, as always, safe flying,
Your Wings Wealth Management Team
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision. Please keep in mind that insurance companies alone determine insurability and some people may be deemed uninsurable because of health reasons, occupation, and lifestyle choices. Guarantees are based on the claims paying ability of the issuing company.