Family Planning – Life Insurance

Photo Credit: Sujin Jetkasettakorn,

Growing up in my community I can remember a few people whispering about life insurance after a relative passed away. Usually, the whispers were followed with, “No, he didn’t have life insurance, but his family will just have to put him away with dignity.” Family members would often be solicited to contribute their monetary funds to help bury loved ones which was common, but there was also a taboo and stigma related to obtaining life insurance. Some people viewed it like they were purchasing a death decree.

When I landed my first “real” job out of college, I was given information about whether or not I should add more money to their employee life insurance policy, I was a little nervous when I looked over the papers because I really had no clue about how much life insurance I need. As time progressed and I learned more about what life insurance really was my  fears subsided as my education about it increased.

What is Life Insurance?

Life insurance is a contract between an individual and a “Life Insurance” company. The individual pays to take out a policy that is paid to a beneficiary(ies) after the policy holder dies. A Life Insurance policy is usually obtained to protect the families’ financial assets if the person or people making money in the family dies. There are three types of life insurance available: the first type is term life insurance (which is available for a limited-fixed number of years), whole life insurance ( is available until the policy holder reaches about 100 years old), and universal life insurance (is available for a person’s entire lifetime.  Universal life insurance is also different from the other two types because it is an investment account with real money earning interest). Here is a more comprehensive definition regarding the three policies mentioned:

Additionally, Wes Brown shares more in depth knowledge about Life Insurance.

Life Insurance should be the fundamental building block of any financial plan. Without it, a person’s entire financial plan is subject to collapse. It is wiser for people to look for options that are not only budget friendly but also one that will provide adequate coverage to replace the Human Life Value. The HLV refers to the amount of money a person is likely to make at the current rate of production to retirement. So at $100,000 per year and working for 20 more years the figure would be $2,000,000. This is one of  the best guidelines to use, because some people face financial restraints, which may hinder their financial goals from being achieved in the first attempt. In these instances the person needs to chip away at it by getting a chunks of coverage when possible.

If there are medical concerns, some policies will be rated meaning that there will be a charge for the additional risk related to covering someone with that particular medical condition. A term policy is the most affordable option; however there may be a need to blend it with some type of permanent policy to ensure that the policy holder is covered for the right amount of time (the longest term policy is usually 20 years).

Whole life policies can open up a number of ways to utilize the Death Benefit while the policy holder is still alive. It is possible that you may have heard of some of these such as the building of cash value and dividends but there are more than 50 other ways.

Overall, if you cannot find one policy to fit all of your needs, another strategy is to place smaller policies with several companies. It is important to have policies that provide your family with peace of mind.


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