Life Insurance

Life insurance is a contract between you (a policyholder) and an insurance company (an insurer) to provide you with coverage based on your premium. Life insurance policies are created to help provide a safety net for your named beneficiary upon your death. The death benefit can provide financial comfort that your family can use to pay medical bills, funeral costs, mortgage payments, and other bills or daily expenses.

Since purchasing life insurance is very important, it is worth researching to choose the best type of life insurance policy and find the one that makes more sense for you and your family’s needs.

Term Life Insurance

Term Life Insurance covers you for a predesignated period, or a term. Term Life policies will cover a length of time, often preset at 10, 15, 20, 25, or 30 years. Your age at the time of purchase is a factor as to the length you can choose. The longer the term, the more it may cost. In most Term Life options, the cost never goes up and the coverage never goes down, and the insurance company cannot cancel your coverage unless you fail to make the premium payments (or due to fraud). When the policy term ends, so does your coverage. Unlike Whole Life, term insurance does not build a cash value.

WHY CHOOSE TERM LIFE? Term insurance might be a good option if you need to cover life events, such as the birth of a child, or to protect your mortgage, or to replace the loss of income during your working years (i.e. – if you earn $50,000 a year and have 15 years left until your projected retirement, you might choose $750,000 in coverage). Affordability is also a factor, as term insurance costs less than Whole Life. In some cases, you can renew your term life policy after the initial period ends without proof of insurability, but most likely at a much higher price.

Traditional Whole Life Insurance

Also known as permanent life insurance, Whole Life insurance provides protection for just that – your whole life. This type of coverage not only provides a death benefit, but it also builds a cash value over time. The insurance company invests the premiums being paid and pays a pre-determined fixed rate of earnings to the policyowner. These funds, which form sort of a nest egg, can be accessed later as a loan. Should the insured pass away when there is an outstanding balance from a loan, that balance is deducted from the face value (death benefit) of the policy prior to being paid to the beneficiary(ies).

WHY CHOOSE WHOLE LIFE (WL)? Whole Life is an excellent choice for someone who wants the peace of mind knowing that whenever they pass there will be insurance available to help cover end-of-life and burial expenses.

Insurance companies might also provide options to the length of time one would pay their premiums, such as 10-pay, 15-pay, 20-pay, as opposed to lifetime pay. For example, if you choose the 10-pay option you would pay your (higher) premiums for a period of 10 years and then your coverage is paid-in-full. You no longer are required to pay the premium and your coverage remains in force for the rest of your life.

Universal Life Insurance

Like a traditional WL policy, a Universal Life policy is a type of permanent insurance that provides lifetime coverage, but its cash value typically grows at a faster rate. A fundamental difference to Whole Life is that Universal Life insurance premiums are flexible. In other words, once you have built a cash value within your policy you can use those funds to pay your monthly (quarterly, semi-annual, or annual) premiums. This flexibility could very well result in your policy becoming paid-up for life, whereas your earnings have grown and are growing to the point that those earnings cover the cost of your insurance.

WHY CHOOSE UNIVERSAL LIFE (UL)? The opportunity for increased earnings, flexibility in payment options, and permanent (lifelong) coverage are three of the top reasons for choosing Universal Life.

Additionally, life insurance is a wonderful vehicle to help avoid the Public Probate Process. With both life insurance and annuities, the funds bypass the probate process and are paid directly to the beneficiary. See the chart

Final Expense Insurance

Final Expense (FE) life insurance is a category of permanent coverage used specifically to pay for end-of-life expenses, including burial and funeral costs. Seniors who do not have permanent life insurance or who have had a term policy that has or will end are prime candidates for FE coverage. Even if you have enough in savings to cover these expenses, it is viewed to be a wise choice to purchase final expense coverage to transfer the risk to the insurance company.

In other words, quite often we have seen folks pay far less in insurance premiums as compared to footing the entire funeral bill out of personal funds. When choosing a FE policy two things should be factored into your decision. First is affordability, and second is the amount of coverage needed to not place a financial burden on your loved ones.

WHY CHOOSE A FINAL EXPENSE POLICY? If you are on a tight budget, something is better than nothing. These types of policies are also good for those who have had some dings to their health history. Options are available for those who are still in perfect health, and for those who may have more serious health conditions, they can still qualify for coverage as well.

How Much Does a Funeral Cost?

At last check, traditional burial services can range around $15,000 – $17,000, or even higher, depending on the options chosen (embalming, choice of casket, visitation/wake, graveside service, paying for a preacher, piano player, flowers, etc.). The average cost of a funeral with cremation can be in the $6,000 – $8,000 range. These prices vary based on geography, too.

Making a Decision

If you are in the market for a life insurance policy or would like to review your current insurance, contact Solid Rock Insurance Solutions. Our insurance experts will walk you through the process of securing life insurance that fits your needs.
We also offer a free, no obligation comprehensive review of your life insurance situation. Be sure to contact us TODAY to get on our calendar. We will be the first to tell you if you are already in a great position with your existing life insurance.