Life Insurance Options: The Path to being Self-Insured

Life Insurance Options
Rianna Caswell, Wealth Advisor

No one wants to think about their death, especially young people, but putting off purchasing life insurance can be a costly mistake. Death is inevitable, and largely out of your control, but what you can take control of is how you provide for your loved ones when you are gone. Having life insurance guarantees your family is always financially protected, and Anchor Wealth advisors are here to guide you through that process.

We recommend life insurance for anyone who has financial dependents, and for any parent who has children under age 18 (even if they are a stay-at-home parent). You need insurance to replace the income that would be lost if you were gone (aim for insurance of 8 to 10 times your current income), as well as to cover the non-financial contributions a stay-at-home parent makes to the family that would need to be replaced. When deciding which type of life insurance to purchase, there are several options to consider: term life, whole-life, or self-insured.

What is Term Life Insurance?

Term life insurance provides protection for a specific period of time, or term, typically 10-30 years. If the policyholder dies within that period of time, the death benefit will be paid out. If you are looking for the most cost-effective way to protect your loved ones when you are gone, then term insurance is right for you. Premiums for term life insurance are cheap, especially for young, healthy, non-smokers. Age, occupation, and lifestyle play a factor in the price of your premium. If you are young, live a healthy lifestyle, and work in a low-risk job, you can purchase large amounts of death benefits at a surprisingly low rate.

What is Whole-Life Insurance?

The price tag for whole-life is drastically higher, but it guarantees you a payout regardless of when you die and builds guaranteed cash value. This option is considered when someone is wishing to leave their loved ones an inheritance with their life insurance. Whole-life premiums, while significantly higher than term, remain the same throughout your life, safeguarding policyholders from extreme hikes in rates.

What is the best option?

Our wealth advisors typically recommend choosing term life as a path to becoming self-insured. This option gives you the highest level of control and flexibility of your hard-earned money. By purchasing the cheaper term insurance, you can then invest your saved money into building assets on the side and ultimately become self-insured. The growth of the assets you invest outside of your insurance policy will often outpace the cash value of your whole-life policy.  Self-insurance gives you the freedom of being your own insurance provider. It is the pinnacle of defining money’s purpose instead of its performance.  When deciding which term life policy is best for you, premiums should be your primary consideration. At Anchor, we run quotes on all of the top-rated companies to ensure you are getting the very best rates. In turn, more of your money can be placed in investments and growing, so your loved ones will never have to be burdened by the loss of your income when you die.

Anchor Wealth advisors are here to help you on your path to becoming self-insured. When you pass away, grieving cannot be avoided, but leaving your loved ones penniless can be.