Life insurance comes in many forms and can serve different purposes. We view life insurance as a tool, rather than an investment, to manage any potential risks or exposures to your overall financial well-being.
Life insurance is primarily used to provide income to your loved ones when you are no longer there to financially support them. If you passed away and your spouse or partner had to pay off the mortgage or your children still had to get through college, a life insurance policy could cover those costs.
Life insurance can be one of two basic types: term and permanent. Term life insurance is the least expensive and covers a certain period like when your kids or others are dependent on your income, or for the term of your mortgage. You can also “layer” term policies to have different amounts of coverage in different stages of your life. For example, maybe you have a 20-year, $1M policy and 25-year $500K policy. So for 20 years (perhaps the amount of time your kids are in college and you’re carrying a mortgage) you have $1.5M in coverage, and then for 5 more years (perhaps your kids are through college and you only have a few years left on your mortgage) you have $500K of coverage. This strategy can help you save on premiums in the long run.
Permanent life insurance is more expensive but it accumulates value, and there’s a greater variety of permanent insurance policy types to choose from. We don’t typically recommend these policies to our clients, though if you have one we can certainly advise on what to do with it. You may choose to keep it, or there are ways to convert the value of the policy into another life insurance policy or a hybrid life/long-term care policy that might be more beneficial to you.
See this resource for things to consider when purchasing a life insurance policy, and of course you can contact Debbie for a conversation about life insurance and how this tool fits into your plan. We work closely with an insurance brokerage who specializes on supporting fee-only advisors such as our selves: LLIS. If we do recommend you purchase a policy, we will likely send you over to the lovely folks over there.