I’m sure you saw the commercials on TV “Get $500,000 of life insurance for $20 a month etc.”
You see a happy idealistic family having a picnic. In most cases in the above scenario the insured most of the time the primary breadwinner would have to die in a certain time period such as 10, 20, or 30 years, if this happened the beneficiaries traditionally the family would receive the $500,000 death benefit.
I understand the logic since the coverage is on the individual’s life it’s been called Life insurance. It’s typically not the most positive thing to speak about because you have to envision yourself dead and what will happen to the people you leave behind financially.
There are people who die untimely, and not only do the loved ones left behind have to be left with the grief of no longer having their departed in their lives anymore, but there may have been a considerable enough amount of debt that is left behind. There are cases where there is not even enough money to bury the departed. You see websites like Gofundme.com and several other crowd funding charitable websites to encourage people to virtually pass the hat around to help with expenses.
Let’s get back to Death Insurance which is an intriguing thought of paying money on a monthly basis. Typically people will get a term policy for a specific time period from 10-30 years, but what happens after that term? We are in a time period in our modern history that there is a retirement crisis, so our traditional working years may make us work long after 65, some will work until the day they die. Death insurance you are renting coverage from insurance companies and over 90% of the insurance policies do not pay out during the specified term periods, because the insured is not dying in those time periods.
What about Life Insurance? Life insurance will offer the same Death Insurance protection but so much more benefits. Life Insurance you own the coverage you designate for your entire life, there can be critical illness protection that if you get diagnosed with Cancer, Heart Attack, or Stroke etc. If you survive you and possibly loved ones will have cost of missing work, insurance deductibles, special diets and much more. You can’t just believe health insurance covers all the unforeseen expenses that come along with being sick.
Life insurance has a very neat feature, you can pay more than your insurance premium and the insurance companies invests the difference, this process is called overfunding your policy. This creates cash value, in my book “How to Hire Your House” I teach people how to manage their home equity in a cash value life insurance policy. When you have cash value in the life insurance there is some very favorable benefits that are built inside the plan.
If you have $1,000,000 of value in your 401k, if you take out $50,000 you have $950,000 earning interest because you took out the $100,000. If you have the same amount of cash value in your life insurance policy you take out $50,000 as a loan, you still have the entire 1,000,000 earning interest. The $50,000 is tax free because it’s a loan, and the insurance company takes $50,000 from your death benefit which would be a lot higher than your cash value, and there are policies that annually increase. So you see using your policy like what I just describes can potentially create your own pension that will allow you to not run out of money. There are even policies that will allow you to gain when the stock market gains but if the market tanks you don’t lose any principle.
Some financial experts hate these products because you do not need a stock broker to buy this policies, so it becomes a conflict of interest.
Why buy Death Insurance when you can use the benefits of Life Insurance while you are alive while at time same time protect your loved ones when you are no longer here.
Mario Henry, a former National Football League player, is a financial services professional with 18 years of experience in the industry and author of "How to Hire Your House," an innovative guide on how to create a tax-free pension and sustain sufficient income through retirement. Mario also is a licensed insurance broker and a national motivational speaker. He was a wide receiver with the NFL’s New England Patriots and a scholarship football player at Rutgers University.
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