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Basics of Life Insurance

Life insurance is a crucial piece of a solid financial plan.

An untimely death causes a lot of emotional hardship.  Life insurance is there to make sure it doesn’t also cause financial hardships.

Nobody likes to think about their own mortality.  But taking the time to look at life insurance while you are healthy is crucial because a health event may prevent you from being eligible to get it. 

When considering life insurance, the first thing to focus on is how much life insurance do you really need.  This is different for everyone.  And there is a lot more to think about than just how much money you earn. 

For example, while a stay at home mother may not earn an income, an untimely death could create a lot of financial hardship for the family.  In this example the working father may now need to take time off work, enroll young children in day care or worst case must quit work to take care of children.

Some of the things to consider when determining how much life insurance is needed are:

  • Current age
  • Debts
  • Financial goals, such as paying for children to go to college or creating an inheritance
  • Replacing lost income
  • Other financial impacts (such as the example above)
  • Affordability of the coverage

For some people, tax planning and charitable giving may also be considerations.

Next, you have to consider what type of life insurance is needed.  There are more types of life insurance available than most people are aware of.

The types of life insurance are:

  • Term life
  • Whole life
  • Universal life (UL)
  • Guaranteed Universal Life (GUL)
  • Indexed Universal Life (IUL)
  • Variable Universal Life (VUL)

When you dig deeper, there are various sub-types of these as well.  For example, term life can be an annual renewable term, 10-year term, 20-year term, 30-year term or a few insurers offer a 40-year term.  There are other sub-types that are only good for certain situations such as a second to die policy which can work very well for leaving an inheritance, but wouldn’t work if you are trying to protect your spouse to replace lost income.

With so many types of insurance available and many important considerations working with a professional can really help to make sure you have the coverages you need.

Please let me know if I can help you with your life insurance coverage whether that is getting a new policy or reviewing existing policies.

Gene Zrinyi

Financial Advisor

Tri-State Financial Services