When I turned twenty, I had someone approach me about life insurance. I was young and felt that I would live forever. After the agent went over the policy, all I saw was another out-of-pocket expense. I also thought that I would be financial well off when I got older, so I did not need to buy life insurance.
Boy, I was wrong.
Insurance is a great tool to grow your wealth. We will go over some basic insurance plans and how they can benefit a user that purchases life insurance. I finally broke down in my fifties and bought a term and variable life insurance policy that follows the stock market.
There are really only two main types of life insurance policies, they are term and whole life. Term life insurance policy lasts for a set number of years before it expires. If the owner of the policy continues to pay the premiums and dies before the expiration date, then your cash value of the policy will be paid out to your beneficiaries. The death benefit can be paid out in a lump sum, monthly payment, or annually.
A whole life policy is a permanent life insurance policy that has a premium and cash value meaning the insured person is covered for the duration of their life as long as the premiums are paid. The cash value is like a savings account which can provide a dividend. Whole life policies are typically more complex, but can satisfy specific needs, like large estates or inheritances.
Other plans within the whole life or term families are Universal Life, Variable Life and Variable Universal Life, Simplified, Guaranteed, Final Expenses, and Group Life.
With Universal Life you can change the premium and death benefits amounts without getting a new policy. With a Whole life policy, the growth rate is usually fix but with a variable life the policy is more akin to investing in the stock market. However, fees can be lowered but the product can be riskier since the allocations are in the stock market. With this policy you can lose money. The variable life insurance policies provide tax-free money to beneficiaries during the time that the policyholder is alive. Once that person dies, however, that money is retained by the insurance company.
With a Simplified Issue Plan, you can skip the medical exam, but you still need to fill out the health questionnaire. This is great insurance for people that have pre-existing conditions or poor health.
Guaranteed Issue Plan takes it a step further and you do not have to take the medical exam or fill out the medical questionnaire. Guarantee Issue is usually for the elderly population looking for a lower cost premium. However, sometimes the premiums are not always lower since the applicant is not taking a medical exam.
Final Expense Insurance is a way to cover funeral expenses or anything associated with someone’s death.
Group Life is an employee benefit insurance plan provided by their employer. Group Life is most commonly, term insurance. It’s nice when an employer offers this service with no cost to you.
Looking back when I was young, I should have bought a whole life insurance policy, I would have been ahead of the game financially. There are so many advantages that a whole life policy can offer me. Some of the advantages when buying a whole life insurance policy in your twenties are a cheaper premium, pays dividends, and has tax advantages. But the reason a whole life policy is such a great tool is because it is an asset. As you build up wealth you can take a loan against the policy that can help with purchasing your first house, pay for college, or buy another asset. Also, the premiums will never increase through the life of the policy. This is why it is so important to invest in a whole life policy when you are young.
I hope this helps, a lot to take in, but a basic understanding of life insurance and how it can benefit you when growing your wealth.
For more information on estate planning and life insurance you can go to www.DiverseInvesting.com or purchase The Road Map to Investing on Amazon.
DISCLAIMER
Company does not give legal, tax, investment, or economic advice. Each Applicant should consult with his or her own legal, accounting, or investment advisor regarding matters of real estate and other investments and financial and economic matters.
At times, Company may allow products, services, and investment opportunities (“Opportunities”) to be presented to Applicant and other participants attending Company sponsored programs. Company does not endorse and makes no representations or warranties regarding any Opportunities that might be presented. Applicant and other participants should complete their own due diligence and seek advice from legal, financial, accounting or other professionals prior to entering any arrangement regarding the Opportunities.
Company allows outside vendors to sponsor events. Sometimes, these sponsors pay a fee to exhibit their items and services at Company programs and events. Company does not investigate or make any representations regarding the sponsors or their services including, but not limited to their quality, reliability, or integrity. Likewise, Company does not investigate its applicants or program participants. Company assumes no responsibility for any act or omission of its applicants, sponsors or program participants