Aaahhh, insurance! That dreaded word feared by most, and an entire industry that leaves many skeptical about what they are actually paying for. Truth is, insurance of any type can be a valuable tool when it comes to protecting yourself, your bank account, and your loved ones.
And now for our sales pitch…….sike! Been there, done that. We made a business decision not to sell life insurance, but we are licensed in it. So we can answer your questions and concerns about why you may want to consider life insurance, how much you need, and what type. That’s right, there are multiple types, but that is a blog for another day. In this article we are keeping it simple. In full disclosure, both of us have purchased plenty of life insurance to cover our families, that’s the only bit of selling we’ll do today.
Paying For It
Your life insurance premiums work much like those for your car insurance. You’ll pick a coverage amount (death benefit), and the insurance company will determine your rate. The rate is how much you’ll pay each month for the policy (premium). It is determined by several factors: gender, age, health status, and some others, even your personal activities. Now there is flexibility on paying the premiums depending on the type of policy, but you can be sure that as long as you make the payments your policy will stay intact. Plus, if you get a term policy, they can be pretty affordable (give us a call to talk about it specifically).
Many policies today will provide you with a couple of add ons that let you customize the policy. These are called riders. Child riders will let you get a small amount of life insurance on your kids. Some will waive your premiums from being due if you become disabled. Others would give you the option to tap into the death benefit early if you became sick, disabled, or otherwise needed some extended care. Others will let you select how the benefit is paid out (more on that below). While these things are intended to let you build a policy that best fits your needs, you’ll want to be clear on the details of what they’ll do, when they’ll do it, and what their limitations are. And like all other great things, adding any of these options may come at a cost and increase your monthly premium. In the words of our great Chuck Miller, “there’s no such thing as a free lunch.”
The Pay Out
o you’ve passed away. Sorry bud, it’ll happen to everyone. But now your beneficiaries (those precious people in your life) have to be paid out on that policy you paid into. The most common method is a lump sum. Which is great if you are the recipient because you’ll get one big check. If you’d feel better with them not getting a potentially life changing sum of money, you can pick an installment pay out. With this your beneficiaries will get partial payments each month or each year for the time period set up through your policy’s contract.
By the way, life insurance pay outs are tax free.
Get busy livin’,
DISCLOSURE: The ideas, thoughts, and opinions in this article are our own, except where sources are specifically cited, and are property of Millennial Financial Planning. This article is intended for informational and entertainment purposes only, and does not serve as direct financial advice, nor is it an endorsement for or against the Blended Retirement System. Speak with your financial professional for direct advice and guidance. All investments contain risk and the potential loss of principal.