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Life insurance can be confusing. Here are answers to some of the questions you might have.

You may have heard a lot about life insurance, and it probably gives you a pretty clear picture of the very basic tenets. For example, you probably know that it can pay a death benefit to your heirs in the event of untimely death, potentially giving them a chance to move on and properly grieve without having to worry about the financial side of the equation.

You might also believe that life insurance is “use-it-or-lose-it,” meaning that if you don’t die in a given timeframe, your family won’t receive the death benefit, and all of the premiums you’ve paid over the course of your term will have been for nothing. Actually, life insurance offers more than just the death benefit in a predetermined term. Let’s go over some of the most common questions we get regarding life insurance and why it can be helpful to add it to your financial plan.

Why is it important to have life insurance?

As we mentioned above, life insurance can be an important protective factor for your family in the event of an emergency, but did you know that you can also use many of the features offered by a life insurance policy while you’re still alive? New features include living benefits, a cash value portion that can allow for growth and protection, flexible premiums, optional riders, a tax-free source of retirement income, and more. This is all in addition to helping your family recover financially when they lose someone they relied on to provide for them and care for them, and these new features of permanent life insurance make it a versatile asset that we can help you add to your portfolio.

How much life insurance should I have?

In general, it can possibly be a good idea to insure your life’s earning potential, giving your family the chance to recover funds lost by your untimely death. At the same time, life insurance can allow you some more flexibility in the modern day, meaning that the amount of life insurance you purchase can be entirely up to you. Now, with the right policy, you can determine your premiums and level of protection, potentially even giving you the chance to grow money in a cash value portion that can either be used for tax-free retirement income or as a nice death benefit to help your family. Nevertheless, we’d always recommend speaking to us when considering a life insurance policy, as we can help you determine what might be the right solution for your unique situation.

What are the different types of life insurance?

Above we mentioned, sometimes a life insurance policy is funded by predetermined premiums over the course of a predetermined amount of time. If you don’t die within that timeframe, those premiums are often for nothing, meaning that your family will only receive the benefit of the policy in the event of untimely death. This type of policy is called a term life insurance policy, and while it may come with lower premiums, it is certainly the most limited of the four types.

The other three types of life insurance are permanent solutions, and they are called whole, universal and variable. All three come with a cash value portion, however that cash value portion grows, protects and functions differently based on the type. With a whole life policy, your premiums, and therefore your cash value portion, are fixed. As long as you pay those premiums, your policy will remain in force, and your cash value may be protected and subject to growth at a rate guaranteed by the issuing insurance company.

Under a universal life policy, you can still experience protection and rates of growth guaranteed by the issuing carrier, however premiums are flexible, meaning that you can determine them, even in harsher economic conditions when you aren’t able to pay as much. This could be an advantage over a whole life policy that is no longer in force if you do not pay your premiums. The final type of life insurance is variable, which is permanent and has a cash value portion, but that cash value portion functions similarly to the way money in a mutual fund would. It is directly invested in the market, meaning you could achieve great market gains, but you are also subject to market downturns and declines.

Who can I go to for more answers to my questions?

Obviously you’ll have more questions when you implement any asset, policy or product into your portfolio. It’s also quite likely that you’ll think of questions as the process goes on, meaning you’ll need someone readily available to field them. We always recommend speaking to us before making any major financial decisions. As licensed and registered financial professionals focused on designing a holistic plan for your present and future, we can answer your questions and help you find a policy that matches your goals and circumstances. In your financial career, we are your partner and your equal, and we put ourselves on the front lines with you to find your ideal vision of success and comfort.

If you have any questions about adding a life insurance policy to your portfolio, please give us a call. You can reach Dawn Potts at (913) 320-2069 or schedule an appointment with her directly online here.


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Dawn Potts, AIF®, Financial Advisor / Partner

Prime Capital Investment Advisors, LLC
6201 College Blvd, Suite #150
Overland Park, KS 66211