Did you know you can cash out millions of dollars from your life insurance policy while you’re alive? That’s right, you don’t have to die to benefit from life insurance!  It’s not just for your dependents, but can also benefit you! 

If you’re a young adult, life insurance may not be at the front of your mind. You may be focused on establishing a career, managing student loans or other debt, or trying to get your life started. Insurance is a form of risk management, mostly used to guard against the risk of a loss, such as your death, but that’s not its only purpose. Your responsibilities are increasing and, as responsibilities increase, there is more to protect. Now is a great time for you to consider life insurance.

Did you know you can cash out millions of dollars from your life insurance policy while you’re alive? That’s right, you don’t have to die to benefit from life insurance!  It’s not just for your dependents, but can also benefit you! 

If you’re a young adult, life insurance may not be at the front of your mind. You may be focused on establishing a career, managing student loans or other debt, or trying to get your life started. Insurance is a form of risk management, mostly used to guard against the risk of a loss, such as your death, but that’s not its only purpose. Your responsibilities are increasing and, as responsibilities increase, there is more to protect. Now is a great time for you to consider life insurance and I’m here to explain why.

1. Low Rates 

While there are several factors that determine the cost of life insurance, generally, young and healthy adults get the best rates. So there are scenarios where a 20 year old could get rates at half that of someone in their 40s, assuming both don’t smoke. 

Age can be a significant factor that influences your life insurance premium.  What is a premium? It’s the amount that you pay, usually in regular installments, for your insurance policy. The older you are, the more likely it is that you will pay more for life insurance since insurance rates are based on how risky it is to insure you.  I don’t mean to sound macabre, but basically, how likely you are to die and they’ll have to make a big payout early. Policies paying out a death benefit usually grant a lower rate to younger, low-risk people like us. So consider buying insurance while you’re in your 20s or 30s so that your premium will be lower.  With the right kind of policy, that premium will not go up as you get older.

• Protect your loved ones

Life insurance will help to protect your family and your loved ones. Let’s fast forward five years from now….you have a child or you’re married, or your responsibilities have now increased…you’re suddenly thinking, “How can I protect the financial stability of those I love?” If your loved ones depend on your financial support, then life insurance will be especially beneficial because if something happens to you, it will replace your income to continue to support those you love. This is really important if you have young children like I do. 

• Living benefits

You can receive benefits while you are alive!  Yes you heard me right!  Life insurance is not just for when you’re gone. It can also be an investment. Certain plans allow you to build cash value through your life insurance policy that accumulates over your lifetime. What does this mean? Cash value life insurance policies provide lifelong coverage combined with an investment account, so a portion of your premiums are directed to the investment account.  This is called the cash value — and this money grows with interest over time. If you decide to cash in your life insurance early and give up your coverage to the insurer, you will receive the policy’s cash value (minus fees). You can also access the cash value as a loan, use it to pay premiums, or make a partial withdrawal. Interesting right?

But wait, there’s more…. If you have a participating cash value life insurance policy, you can even receive dividends! Mutual insurance companies are insurance companies that are owned by their stakeholders, therefore, if the insurer makes more money than they need to run the business, they pay some of it back to policyowners in the form of a dividend. This is a living benefit of life insurance since you can use the money while you are alive. Depending on the type of life insurance you have, it can even cover unexpected medical issues.

Types of Life Insurance: Term life vs. Whole life

Since we’re talking about types of insurance, there are two types—term and whole life. Let’s say that two clients of similar age and health get a policy with J$100 million (US$700,000) payout when they die. An agent told us that one could pay premiums of J$40,000 (US$280) while the other pays J$400,000 (US$2800) a month. How can that be possible? Well it’s because one is a term life policy and the other is a whole life policy.

Term insurance pays only if you die during the term of the policy, which is usually between one and 30 years. Most term policies have no other benefits, so that’s why it’s cheaper. Whole life or Permanent Insurance, on the other hand, pays that death benefit whenever you die even if you die after a 100 years. Plus it also allows an investment aspect to the insurance.  So make sure you know which type you’re buying.

Some insurance companies locally even allow for persons to switch from term to whole life once the term has expired and the client renews within 30 days. This switch avoids having to prove that you’re healthy, so some clients will make the switch later in life to the more expensive whole life insurance, since they’ve demonstrated their health within the term.

Again with whole life insurance, the benefit is guaranteed to remain in force for your lifetime once you pay your premiums on time.

Term life insurance is like leasing a home, while whole life is like buying a home.

Term insurance can cover you from 10-30 years while Whole life, as the name indicates, covers you for your whole life. Term insurance can protect your  mortgage, income, or children’s tuition, while Whole can give you cash value but is more costly than term insurance. There are different types of whole life insurance plans that offer different benefits and are differently priced.  Both Term Insurance and Whole life can also have varying plans.

When you’re just starting out, life insurance may not be your first concern but putting it off may cost you, so find out what plans suit you best and invest in life insurance while you’re young!

Categories: MoneyMondaysJA