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September Is Life Insurance Awareness Month

Investing Retirement Funding Insights

Life insurance is one of those topics that we as a culture, DO NOT like to talk about.  No one wants to think about their eventual end. Talking about passing away in the very distant future is often uncomfortable, talking about the possibility of passing away before reaching old age can be REALLY uncomfortable. 

Having this conversation and discussing the role life insurance plays is very important. In its most simple version, it is an important part of any protection strategy. For National Life Insurance Awareness Month, we wanted to share some helpful information about life insurance, including what it is, its different types, and how it can help protect your family in case something happens.

What is Life Insurance?

According to Life Happens, a nonprofit dedicated to giving users unbiased insurance information, life insurance is an insurance policy that provides cash to your beneficiaries after your death. This "death benefit" helps replace your income and also supports your loved ones in non-monetary ways. Your beneficiaries can use this payment for anything they like but typically it goes towards funeral expenses, mortgage payments, college tuition, and other bills.1

Are There Different Types of Life Insurance?

There are two main types of life insurance: term life insurance and permanent life insurance. Under the surface, there are many variations of these two higher-level types. Let's look at some of the differences.

Term Life Insurance

Term life insurance policies cover the insured for a specific period known as the term, usually between 5 and 30 years. Term policies pay a death benefit ONLY if the insured person dies during the coverage term. These policies are purely for protection against a catastrophic event. Because they are designed to maximize death benefits, they don't carry any cash value or some of the "bells and whistles" that permanent insurance might. Due to the bare-bones nature of Term Insurance, the premiums are generally lower than permanent life insurance premiums. They can also offer a greater level of flexibility because you can amend your policy as your needs change.

Permanent Life Insurance

Permanent life insurance policies cover the holder for their entire life. Some of these policies also carry a savings or investment component. This "cash value" grows tax-deferred and you can borrow against it while you're still alive. One thing to know is that withdrawing these funds will decrease the policy's death benefit unless the funds are repaid.2

There are more than a few options when it comes to permanent life insurance, to learn more about them in some detail read our previous blog “How to Use Life Insurance and Protect Your Family”.  Each of these policies has its pros and cons.

When considering which life insurance policy is right for you, think about the following factors:

  • Coverage duration
  • Coverage amount
  • Premiums
  • Flexibility
  • Cash Value

Do You Need Life Insurance?

For most people, the answer is an unequivocal "yes." Life insurance can help protect the people you care about if something were to happen to you. This could include a spouse, children, other family members, or anyone else you want to protect. There are a variety of coverage limits, and depending on your financial situation, you may not have to purchase an enormous life insurance policy. Even modest protection can help your family pay the bills and make arrangements.

Forbes has a simple method for calculating how much life insurance you need. Consider all your immediate, ongoing, and future expenses and the financial resources your loved ones already have. Then, subtract your financial resources from the anticipated expenses to obtain the difference. Forbes calls it the DIME method: debt, income, mortgage, and education.3

If you want to review (or begin) your life insurance policy for National Life Insurance Awareness Month, just drop us a line below and we would be happy to help!




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About the Author

James M. Comblo, CFF
is the President & CEO of FSC Wealth Advisors. His greatest passion in the financial services industry is helping clients live the life they want, not the life they are forced to. To learn more about him click here.




1. https://lifehappens.org/life-insurance-101/
2. https://www.usnews.com/insurance/life-insurance/term-vs-permanent
3. https://www.forbes.com/advisor/life-insurance/how-much-life-insurance-do-you-really-need





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