How to best use Life Insurance for your needs

This is the one insurance you are almost certain to use. Everyone is going to die. Morbid as it may be, it's inevitable. Although life insurance is taken out on the person that will be dying, it benefits them none. It does, however benefit those the deceased person has left behind.

There are two kinds of life insurance: Term and Cash Value

Cash Value can have several names so we will just refer to it as "Cash Value" for this article. Term insurance is always called "term".

Cash Value is just that, it builds a cash value to itself for the life of the policy. It can be used as a savings account building funds until you want to use it. Cash Value insurance is typically a bit more but does have the benefit of being able to draw out the cash if the person needs those funds. If the insured person dies, the insurance pays the beneficiary the amount of the policy. The funds that were building now belongs to the insurance company.

Term may be a better bet but it is for a certain "term". 5- 10 - 20 even 30 year terms are available. The younger you are, the longer you should get the term for. The nice thing about this insurance is that it typically costs less and you can insure yourself for more.

A good rule of thumb is to insure the main income provider for 10 times their income. Then, when the insurance company does pay on account of a death, the beneficiary can invest that money in a 10% return investment and simply live off the interest and the insurance has replaced the income.

For example: If a family makes $40,000 a year, the main provider should be insured for $400,000 upon death.  If the beneficiary invests that $400,000 in a 10% rate of return, 10% of $400,000 is $40,000. The income has just be replaced.

For more information on which policy may fit your situation, please give us a call today! We would love to send you some free quotes on insurance.