As we take inventory during the holiday season, we realize that our “stuff” is not the most important thing in life; it’s our family and friends. Have you thought about what you want to leave behind when you’re gone?
There are ways to transfer your wealth to the next generation and relieve your loved ones of the burden of unpaid medical expenses, outstanding loans or education debts. There are even ways to plan for future medical expenses and future living expenses by using proceeds from life insurance before you die.
HERE ARE SOME OPTIONS:
TERM LIFE INSURANCE
This is a lower-cost option to provide a firm rate for multiple years. A longer-policy term will save you the most money over time. If you die during the policy term, your heirs get a set death benefit. If the term ends and you are still alive, nothing is paid.
This type of coverage is the most cost effective for a young family with a mortgage or other debt and children who will require funding for future education. The best thing about term life insurance is that it is usually affordable unless you have significant health conditions. The downside to term life insurance is that the term will end; you’ll have to obtain other coverage, usually when you are older or have medical conditions, and the rates will not be as favorable.
WHOLE LIFE INSURANCE
This is considered more permanent coverage, meaning that it will stay in place until you are over 100 years old, as long as the premiums are paid. The rate is higher than term life, but it includes a savings component that grows and can be withdrawn in the future. The premiums are stable throughout the policy, which makes budgeting easier.
The best aspect to whole life is that it probably won’t expire while you are alive, and you can withdraw funds if needed from the cash buildup to use as you see fit — whether to pay medical bills or take a trip around the world. The downside is that the rate is higher and could be a financial burden when you are younger.
ANNUITIES
These are used to protect your investment and provide a steady income stream for you during retirement. The benefits of an annuity are that your money is protected in an insurance product and is tax deferred until withdrawal, and it provides more financial security in retirement. The downside is that annuities are more complicated and have many restrictions.
Not sure which option is right for you? Get some advice from a trusted insurance professional.
