business Life Insurance: Is it Worth the High Premium? February 27, 2019 Considering buying life insurance? Good idea! Though life insurance at times comes with a high premium, it can provide peace of mind for you and your loved ones. Life insurance is a key financial asset that serves a wide variety of purposes. Although in some cases life insurance comes with high premiums, it is a crucial element of financial planning, and something that will help secure a more stable financial future for your loved ones when you’re gone. Learn more about the benefits of life insurance. What is life insurance? Life insurance is a contract with an insurance company that guarantees payment of a death benefit to named beneficiaries upon the death of the insured person. There are two main types of life insurance….term life vs. whole life. Whole life insurance (also known as permanent or traditional life insurance) provides coverage for the life of the insured or to a specified age. In addition to providing a death benefit (a payout to the beneficiary of the policy specified by the insured), whole life also contains a savings component where cash value may accumulate. On the other hand, term life insurance, also known as pure life insurance, is life insurance that guarantees payment of a death benefit during a specified term (10, 20 , or 30 years for example). Once the term expires, the policyholder can either: Renew for another term, Convert to permanent coverage, or Allow the policy to lapse. Life insurance is subject to underwriting based on your health, so it is best to consider purchasing a policy when you are young and healthy. How do you decide which one is best for you? Whole life vs. term Features Whole Life Term Coverage Duration Covers you for life or to a specified age Purchased to cover a specific time period, like 5, 10, 15 or 30 years. Guaranteed death benefit? Yes, it provides death benefits as well as a cash value accumulation that builds during the life of the policy. Provides death benefits only. Cash Value? Yes No Cost? Premiums generally higher because the policy lasts for a lifetime and has cash value. Initially low cost, increases when you renew (after term is up). Conversion option? No Yes, on certain policies you may be able to convert to whole life. Deciding which type is best for you depends largely on your needs and your budget. For example, high income individuals who have maxed out their 401k plans, IRA and Roth IRA options may benefit from a whole life insurance policy as another asset class as the cash value grows tax free and withdrawals can be structured to be taken on a tax-free basis. On the other hand, if family and financial responsibilities are outpacing income, term life insurance can be an effective method of providing a nest egg if something should happen to you prematurely. The main benefits of life insurance are the protection and peace of mind they provide. Death benefits are how a life insurance policy can compensate those close to or dependent on you for potential loss of income, and the costs associated with death (like funeral expenses). Dying without life insurance can put an incredible burden on your loved ones. The decision to buy life insurance can be complex especially if the insurance is for estate planning, business situations or complex family situations. There are hundreds of insurance companies offering thousands of products. A careful analysis is critical to making the right decision for you and your family. It’s easy to be misled if you’re not well-informed. We can help! Reach out to us.