There are only a few guarantees in life: Black is always in style, “Bohemian Rhapsody” will always be the greatest song ever sung and we will die one day.
Yes, eventually, we will all pass away. It’s the fate we as humans dread most. I know many of us prefer to go about life as if it’s never going to end. But the harsh reality is that it will. I've never really thought of what I will leave behind for my loved ones. Have you?
What will You Leave Behind?
A great majority of us will leave behind family, friends, and unpaid debts like funeral expenses, mortgage payments, medical bills, etc.
The last thing we want to leave our loved ones with are financial burdens. The best course of action is to have a plan ready. When I say plan, I mean specifically investing in a life insurance policy. But which one is right for you?
Term Life Insurance vs. Whole Life Insurance
Before considering life insurance, you should first determine which policy type most suits you: term life insurance or whole life insurance. Let's discuss the difference between the two.
What is Term Life Insurance?
Simply put, a term life insurance policy is for a set period of time. This could range from 10-30 years depending on your age when you first apply.
The idea behind a term is that when it ends there will ideally be no need for the death benefits because your home is paid off, your kids are grown and your savings will cover everything else.
The structure of this policy is designed to offer a payout to beneficiaries only upon death and holds no other value. It’s the more inexpensive option and the premium remains stable throughout the term.
What is Whole Life Insurance?
A whole life policy offers coverage for the entirety of the owner’s life. It holds two purposes: a death benefit to beneficiaries and an investment component.
The investment into a whole life product refers to the policy’s accumulation of cash value over the years. If you so choose, you have the ability to borrow money out of the policy and reduce the future death benefit or you can surrender the entire policy for cash. Some policies offer annual dividends which can be cashed out or put back into your policy to earn additional interest. While this option is generally a bit more pricey, the death benefit is guaranteed at any age and the duality of the policy is very convenient.
Specifics to consider when purchasing a policy:
If choosing term, choose a period (10, 15, 20, or 30 years) that you are comfortable paying throughout the term and that will ensure coverage in the event of an untimely death.
Make sure the amount is enough to provide for your family when you are gone. Realistically, this death benefit will also take the place of your income that is no longer being brought into the household.
Without a death benefit, heirs may be forced to sell parts of your estate, such as homes, antiques, or other valuables to pay for unpaid debts.
If you are leaving behind a lifelong dependent (such as a child with special needs), the death benefit can be put towards a trust to ensure they are cared for, even when you are gone.
Are you planning to leave behind a business or property to one heir? A life insurance policy could be used to compensate others.
Still unsure which option is best for you and your loved ones? Consider talking to a licensed agent to discuss options. They will be able to turn your questions and concerns into a solution the works best for you.