By Haydel, Biel & Associates
If you have dependents who rely on you financially and have assets to protect, you absolutely need life insurance. Should something happen to you, a good life insurance policy has the power to relieve your family of the stress that comes with covering costs such as funeral expenses and lost income. By having any kind of life insurance policy in the first place is doing them a huge favor.
When it comes to picking a life insurance policy, there is a whole slew of options. A whole marketplace, in fact. What often differentiates all these policies are the premiums (based on your age, paid monthly or annually), the benefit amount (what your beneficiaries will receive in the event of your death), and the policy structure (how it’s all set up).
As financial advisors, we always recommend choosing a policy that makes the most sense for protecting your assets and providing for your family without breaking the bank.
Whole Life is one of the most common types of life insurance available. Read on as we break it down so you can determine whether or not it is right for you.
The Premiums
A Whole Life insurance policy will guarantee that your premiums (either paid monthly or annually) will stay at the same rate for the rest of your life or for as long as you hold onto the policy, as opposed to Term Life policies, where the premiums are only guaranteed for a set policy period (10, 20, or 30 year options). However, premiums for Whole Life policies are typically higher than those of Term Life, possibly 6 to 10 times higher. If you want a policy that will last for the rest of your life and you can find a reasonable rate, then Whole Life could be your answer. If you need a policy that has lower monthly payments, then you may need to consider Term Life policies.
The Benefit Amount
The benefit amount, also known as the “death benefit,” is what your policy is worth in dollars and what your family will receive after your passing. Whole Life, Term Life, and Indexed Universal Life all have different benefit amounts to choose from. Typically options are anywhere from a $50,000 policy to well over $1,000,000. Whichever policy you have, or may be looking at, make sure the benefit amount is enough to cover remaining mortgage payments, tuition fees, or any other living expenses your current income covers.
The Policy Structure
This is the crux of the Whole Life insurance model. The reason why the premiums are typically higher for this kind of insurance is that a portion of the premiums goes into a savings account created by your insurance company. The money in this account is guaranteed to grow at a slow and steady pace, as opposed to the market, which can rise up and down with gains or losses at a much faster rate. Contrary to what most people think, this savings account is not meant to be additional income outside of the policy benefit amount. It is actually meant to provide cash value to pay off the premium and provide for the benefit amount, as this policy is intended to last for more than 30 years. This is why the premiums of Whole Life policies are guaranteed for the entirety of your lifetime.
As we have previously stated, if you have an existing Whole Life policy (or have a quote for one) with a reasonable rate that fits into your budget, then keeping or moving forward with this policy will cover you for the rest of your days. If covering the higher premiums to make way for the savings account is putting your budget in the red every month, then moving to a Term Life policy could give you lower and more affordable payments for a similar death benefit.
Where Do You Go From Here?
When choosing a life insurance policy for you, including Whole Life policies, make sure to educate yourself on what and who you need to protect and how much money you will need to do just that. If you need help, talk it out with your financial advisor. Once you get all of this information down, call in for quotes from different life insurance companies and compare the monthly/annual premiums to the benefit options provided for you, whether they are Term Life or Whole Life insurance policies. Then compare these options to your budget and make a decision. As soon as you narrow in on a policy, get it set up right away; the sooner you get this squared away, the better. Once the policy is set up, you will feel relieved knowing that your family is covered no matter what happens to you.
Do you want to know more about protecting your assets? Contact us at Hayden, Biel & Associates by calling (626) 529-8347, or email me directly at ricky@hbawealth.com so we can talk about your concerns and your options.
About Haydel, Biel & Associates
Haydel, Biel & Associates is an independent financial advisory firm serving individuals and families near Pasadena, California. The firm was founded in 2004 by Chris Haydel and Ricky Biel with a desire to provide unbiased, client-centered, community-based financial advice. Together, they have built a practice that has grown into a family of caring, smart professionals committed to blending proven investment methodologies with creative financial technologies that make it easier than ever to accomplish your goals. They strive to keep things simple and fun to give their clients peace of mind and alleviate financial stress. HBA Wealth takes care of their clients’ needs first and foremost and goes the extra mile to make their clients’ finances grow. To meet and see how the HBA Wealth team may be able to help, contact them today at (626) 529-8347 or email Ricky directly at ricky@hbawealth.com.