Term vs Cash Value

Many people don't like discussing or paying for any insurance, especially life insurance. Life insurance is the most important I believe and the easiest type to figure out and purchase. But today there are many insurance companies that are selling consumers the wrong types of insurance and are taking advantage of them.

Many insurance companies are selling cash value life insurance. It is when they convince customers to start a savings plan with their life insurance, so that the consumer believes they are getting two things for the price of one. (The insurance and the savings plan) The reality of it is that you are only going to get one or the other. If you die, you will receive the death benefit and lose the cash value, but if you live you get the cash value but lose the death benefit. Over 86% of life insurance policies outside of work work like this and over 200-400 of these types of policies are sold every night. They are called Whole Life, Universal Life, Variable Universal Life, Etc! The only type of life insurance that you will ever need is TERM LIFE insurance. Term is basically life insurance for a 10-20-30 year period, so that you get the most amount of coverage for your money. Term works just like your car insurance...you just pay for coverage just in case.

Your income is the most important part of your financial blueprint to wealth and financial independence. If that income ever stops, the plan comes to a stop as well. To assure the plan we must insure the plan! If John or Mary don't come home one day, the last thing the surviving spouse needs is a bill over the head to remind them of their loss. Money doesn't replace the lost of the spouse, but it helps relieve the stress of losing one. The plan will stay on course with adequate life insurance and with enough, it will replace the income.

So how do you determine how much you need? Answer these questions and you will know:

1. What bills would you like paid for if John/Mary were to pass?

• Such as, the house, cars, credit cards, student loans, boats, etc.

1. If all the debts were paid off, how much money would you need on a monthly basis to live comfortably?

• Usually you can answer this with a percentage of his/her income they bring home every month.

1. Is there anything else you would like paid for if John/Mary were to pass away prematurely?

• Kids college, Kids future events, etc?

Most experts recommend 8-10 times your annual income is sufficient coverage for life insurance. So remember, TERM LIFE with 8-10 times your annual income is what you need when it comes to life insurance. Stay away from Cash Value policies.