Submitted by Jacob Anderson
Financial Advisor at Edward Jones
Life insurance can help you in two main ways: It offers a death benefit that can assist your family if you’re no longer around and some types of life insurance offer the chance to build cash value, which can work for you during your lifetime.
If something were to happen to you, your life insurance proceeds could help your family meet at least three major needs:
• Paying a mortgage – The biggest expense many families face is their monthly mortgage. If you weren’t around, could your family continue paying the mortgage? With a sufficient life insurance death benefit, they could remain in their home, meeting the monthly mortgage payments or perhaps pay off the loan entirely.
• Paying for education – If you have young children, you may already be saving for their college education. Without your income, would college, or some other form of post-secondary education or training, still be realistic? The proceeds from an insurance policy could make the difference.
• Paying off debts – You might have a car loan, credit card debt or other financial obligations. If your surviving spouse is a joint account holder for these debts, they could still be liable for paying them off. But insurance proceeds could be used to retire the debts immediately or over time.
All life insurance policies offer a death benefit. But permanent insurance, unlike term insurance, also offers the chance to build cash value, which can be a valuable supplement to your IRA and 401(k) or other retirement accounts.
A cash value policy such as whole life also can provide flexibility for changing financial needs or emergencies in retirement. Because this type of policy provides fixed, guaranteed returns, it is not dependent on the performance of the financial markets and is thus insulated from the market downturns that can happen while you’re retired. Taking money from the cash value of your whole life policy may help you avoid selling investments that have temporarily declined in value.
Keep in mind that the premiums for a cash value policy will generally be substantially higher than those for term insurance. That’s why some people choose to “buy term and invest the difference” rather than purchase a permanent life policy with cash value. Whether this strategy is right for you depends on a few different factors, perhaps the most important of which is your ability and willingness to consistently invest the money you would have otherwise placed in a cash value policy.
In any case, should you choose cash value insurance, you generally have three ways to get at the money: withdrawals, loans or surrender of the policy. You’ll want to weigh all the factors involved — including taxes and the effect on the policy’s death benefit — when deciding on how to access the cash value.
Jacob Anderson / Financial Advisor / 28200 Hwy 189 Suite 03-160, Lake Arrowhead, CA 92352 / (909) 337-8188. This content was provided by Edward Jones for use by your local Edward Jones Financial Advisor. Edward Jones, Member SIPC
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