Life insurance is one of the most essential components of personal finance deserving of prioritized consideration of every household. Sadly however it is often relegated as a non-essential budgetary option such as a cable feature. Part of the reason is prevailing confusion and skepticism regarding life insurance. The biggest reason may simply because life insurance means we have to think about and discuss death and it is human nature to be uncomfortable with that subject.

 

Here at MFCS, we are not only advocates of the necessity of life insurance but purpose to provide the related assistance for consumers to understand properly its functions. Besides our mission of educating each person who visits our website, we are staffed by licensed Life Insurance professionals for the state of Florida. If you are from another state, the information on this page is still of vital importance even if we can't provide the related assistance directly. 

 

So who needs life insurance? Well here is some guidance that makes it extremely clear:

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IF SOMEONE RELIES ON YOU FINANCIALLY, YOU NEED LIFE INSURANCE

 

It is literally obligatory and of the highest responsibility that if you are a spouse or parent of dependent children that you have life insurance.

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OBJECTIVE OF LIFE INSURANCE IS NOT TO PLACE A MONETARY VALUE ON A PERSON'S LIFE  

 

The primary objective of life insurance is to compensate for the financial consequences that will occur because of the loss of life. That would include items such as outstanding debts including a mortgage and cost of funeral and burial. 

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THERE ARE BASICALLY TWO TYPES OF LIFE INSURANCE TO CONSIDER

       

You will hear of Term Life or Permanent Life. Term Life is the simplest and least expensive. With Term Life, a life insurance company bases the policy premium on the probability that the insured within a stated term - typically 10, 20 or 30 years. The premiums are cost effective unless you pass the length of the term which is also a good thing to outlive the policy. The other policy is Permanent Life which includes the same probability of death assessment however also includes a savings mechanism. Whole Life has an investment component backed by the insurance company while Variable Life offers investment options similar to mutual funds. A third option is Universal Life which is less expensive than Permanent Life options however contains increased interest rate risk for the owner. One of the basic beliefs we have is that Life Insurance is to protect loved ones from the loss of life while investments should be directed to specific plans just for that. Typically combining both may not provide the maximum benefits for either area. 

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LIFE INSURANCE SHOULD BE SOLELY USED FOR RISK MANAGEMENT AND NOT FOR INVESTING

     

The primary objective of life insurance is to compensate for the financial consequences that will occur because of the loss of life. That would include items such as outstanding debts including a mortgage and cost of funeral and burial. We touched on above some of the investment features of certain life insurance policies. While some of these policies have tax benefits, one can maximize investment opportunities with many other vehicles that are created specifically for that objective. As much as human nature is to gravitate to convenience, that doesn't always result in efficiency. Taking the time and effort to examine true investment tools while making life insurance be what it was designed to be is the recommended route to go. Keep this also in mind and why we are including Life Insurance as part of our financial and debt management portfolio, if you haven’t paid off all non-mortgage debt, contributing to the max company matched 401(k) plan or a healthy Roth IRA contribution or set money aside in an emergency fund (recommended to be the equivalent of a minimum of 6 months of expenses), then you likely need not concern yourself with types of life insurance that contain an investment component. There are true "financial planning" options available to allow you to meet investing potential during the period you are still dealing with the items listed and widening those investment opportunities when you have improved your financial situation. A simple way of summarizing the principle is the money saved by opting for a less expensive Term Life policy versus what is available in Permanent Life options can be used to place in a more beneficial investment vehicle that will yield a much more significant return. 

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Merrick Financial & Credit Services (MFCS) has been operating in the financial counseling industry since 2008. Feel free to provide your email address below to learn more information on life insurance and how to best utilize it for the needs of your family. 

 

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