Buying life insurance can be somewhat complicated, and we want to make sure that you have all the information before you buy your next policy or if you have a policy, we want to make sure that you understand it right so that you can use it correctly. My name is Carmen, and I hope that you please subscribe to our channel and hit that notifications bell so that you can be notified every time the Wealth Nation channel posts new videos.
What Is Life Insurance?
Let’s first dive into what life insurance is, right? Because by the end of this video, I want to make sure that you know exactly what you should be doing with your policy if you’re going to get one or how to maintain the current policy that you have. Life insurance is a contract between the life insurance company and you, the policyholder or policy owner. As long as you pay your premiums—whether monthly, quarterly, or annually—the life insurance company guarantees that they will pay out the death benefit to your heirs or someone you name as a beneficiary.
The Importance of Life Insurance
What the death benefit is: every time you pay your premium, the life insurance company is going to say, “We will pay X amount of dollars to your family at the time of your death.” Life insurance should be one of the most important financial products within your household because death is guaranteed. We tend to insure our houses, cars, electronics, and health, but it’s concerning that 50% of the United States population still doesn’t have life insurance. Without it, a family may struggle to maintain their current financial lifestyle should something happen to you. That’s why it’s important to understand the purpose of life insurance.
Types of Life Insurance
Now, let’s talk about the types of life insurance. There are two main types: term life insurance and permanent life insurance. Term life insurance provides coverage for a specific period of time, while permanent life insurance covers you for your entire lifetime. Darius and I specifically recommend permanent life insurance, particularly whole life insurance, because it guarantees coverage for your entire lifetime without having to worry about renewing your policy. Health can change over time, and renewing a term policy can become expensive as you age, especially if your health deteriorates.
The Benefits of Whole Life Insurance
Whole life insurance provides a solid guarantee for your entire lifetime, and the premiums don’t fluctuate as they might with other permanent life insurance products. The value of whole life insurance lies in its certainty. We don’t want to gamble with the death benefit or what it could grow to; we want to ensure that we have a solid foundation regardless of what the financial market is doing.
Factors Affecting Your Ability to Get Life Insurance
Several factors could affect your ability to get life insurance, including your age, health history, tobacco consumption, and driving record. For example, if you’re 85 years old and have health problems, that could affect your ability to get insurance, but if you’re 85 and healthy, you might still be able to get coverage—though it may be more expensive. If you have health ailments, tobacco consumption, or risky behaviors like skydiving or rock climbing, the insurance company may consider you high risk and potentially deny coverage.
How Much Life Insurance Do You Need?
Once you decide to get life insurance, it’s important to determine how much coverage you need. If you’re looking to use life insurance as a financial tool through the infinite banking approach, your ideal policy may differ from someone who just wants to provide a death benefit to their family. You need to consider factors like your mortgage, college tuition for your children, outstanding debts, and potential funeral expenses. It’s crucial to calculate how much life insurance you need to cover your family’s financial needs.
The Simple Equation for Life Insurance Coverage
A simple guideline is to multiply your income by at least 10 to calculate the minimum coverage you should have. If you make $100,000 a year, a $1 million policy might be a good starting point. The key is to make sure that your family can maintain their lifestyle without you, should something happen. Many people simply get life insurance without calculating how much they really need. It’s important to evaluate all your lifestyle costs and create a policy that ensures financial security for those you leave behind.
The Importance of Reviewing Your Life Insurance Policy
If you already own a life insurance policy, it’s important to revisit it regularly and make sure that the coverage is sufficient for your needs. If you’re unsure, you can contact your life insurance agent to review your policy and ensure that you have enough death benefit to cover your income and any debts.
Conclusion: The Purpose of Life Insurance
Understanding life insurance and its purpose is crucial. Whether you’re using it as a tool for financing your lifestyle or simply providing a death benefit, it’s important to make informed decisions. If you want to work with the Wealth Nation team, click on the link below. We’ll help you understand your options and ensure that you have the right life insurance coverage to protect your financial future.
Make sure to continue owning your own lifestyle, or someone else will.
