Life Insurance:

To be honest with you all, I thought that the insurance Industry was so BORING and that insurance has nothing to do with stability, so yeah, you can say aloud that I was totally wrong.

Thank GOD!! My eyes opened, and my path came across this industry. I have been working within this industry for 2 years, and I can assure you that it is a beautiful one that helps many people and can help you become financially stable from now on. You just need to have a little knowledge about the subject and choose the best option. And guess what? – I will help you with that right now. Keep reading!

In simple terms, life insurance is the coverage of human lives. Meaning is a contract between an Insurance Company and You which entitles that when you pass away, the insurance company will give your beneficiaries a certain amount of money (whoever you choose: Spouse, children, parents).

And I know, I KNOW, many of us don’t want to talk about death; some of us are even scared of talking about it. Still, unfortunately, it is an event that is certain for everybody. And we would never know for sure when it will happen, so making sure we and our loved ones are financially protected is one of the first steps to financial stability.

Life insurance will provide security and peace of mind to you and your family because as soon as you pay the first premium, you will have an IMMEDIATE estate, which means that you right away will have a certain amount of money that will belong to you if something happens to you (it can also be that you have a disability that doesn’t allow you to work anymore). And you DON’T HAVE to build this money; that’s why this step is one of the most helpful and important.

An actual event: One of my partners told me that a few months ago, she helped a man to have life insurance. Unfortunately, two weeks after he paid the first premium ($100 bucks), he died in a fire. His daughter received $250,000. It was a very sad event, and no money could change or take away the sadness, but it avoided worries and pressure to find money to pay for the funeral expenses, which by the way, are absurdly high. This man paid $100 dollars, and his daughter received a much larger amount to help her with the funeral and HER life expenses now that, unfortunately, she doesn’t have the support of her dad anymore.

Can you see the importance?

I have life insurance. God forbid something happened to me; my mom will receive money to cover the funeral expenses, and with the money left my family will be able to continue living the same lifestyle.

Life insurance helps to pay for your funeral expenses, keep your family with the same lifestyle, keep a roof over their heads (as the family can use the money to pay a mortgage), and also can be used to meet day-to-day expenses or college. It’s your money, so whatever you need it for.

For this reason, life insurance is crucial mainly for people like us that haven’t yet accumulated a huge amount of valuable possessions; however, researching and understanding the different types of life insurance policies is essential before deciding.

The most common types are: Term Life Insurance (my favorite), Whole Life, and Universal.

I personally don’t like the Whole Life Insurance policy and find it a form of stealing. Yes, you read that well. That’s why I mentioned that understanding the policies is essential.

It is a VERY PERSONAL OPINION, and this is the reason:

Whole life policy: as its name implies is a permanent insurance until you die or reach the age of 100. It gives you the option of a cash value which is a saving element, meaning that the premiums you pay will be accumulated, and that becomes your savings separate from the death benefit. It also allows you to borrow money from the cash value. Sounds beautiful and appealing, right? – so, what is the bad part? Let’s split everything I explained into a not-fun reality that many agents/brokers (people who sell insurance) won’t tell you.

You must pay the premiums UNTIL YOU DIE or until you reach 100 years old. There is also an option called limited payment, where premiums can be paid-up before age 100, for instance: 20-pay life, where premiums are paid for 20 years. Anyway, as this is a permanent insurance, premium payments are high. Premiums can cost 6 to 10 times more than the other type of policy, which is Term Life with the SAME BENEFITS, which is so funny to me (being sarcastic). So, the high payments increase the odds that you won’t be able to afford the premiums at some point, maybe because of unemployment, difficult times, or retirement, and this will leave you and your loved one without protection.
Cash value: as I explained, this is a sort of savings where a portion of each premium you pay goes towards the cost of life insurance while the other goes toward building up a cash value. However, the cash value benefit DON’T START UNTIL 3-5 YEARS, and generally speaking, you should expect it to take around 15 years or more before the cash value will be worth more than the premiums you need to pay into the policy. In other words, you need to wait a long time until it accumulates a significant amount because a large part of the premiums initially goes towards fees, commissions, and other expenses associated with the policy. Also, the cash value is accessible ONLY during your lifetime. If you pass away, that money will be gone!!! Yes, your beneficiary (your loved one) won’t receive it. He/she will only receive the death benefit. What happens with that money? The insurance company STAYS with it. That’s why when I was studying life insurance, I told my professor, “I’m sorry if what I’m going to say will offend you, but that’s stealing; the company is taking my money.” He responded: I’m glad you noticed it.
Borrowing: This policy allows you to borrow from the cash value. Once your policy accrues substantial cash value, you could take a loan from it for multiple purposes like emergencies, paying life insurance premiums, and more. And if you’re like me (an analytical nerd), you would say, “Wait a second, do you mention the word BORROW? – I laughed the first time I heard the word borrow. So, I also said to the professor, “But wait, why do I need to borrow my OWN MONEY.” So, yes! If you ever have this policy and want to use your savings (cash value), you need to borrow it with a HIGH interest, often 6-8%. Thus, people who like this type of policy because of the cash value should realize that they are better off investing their money in the market than in these policies.

Term Life Policy: it is a temporary protection because it only provides coverage for a specific period of time. So, you can choose which term length makes the most sense for your unique lifestyle or plan, whether you only want it for 10, 20, or 30 years; you can also renew the policy before or at the end it expires. The premiums payment will remain the same for the entire length of your policy. It provides the GREATEST amount of coverage (benefits) for the LOWEST premiums compared to any other policy form of protection.

The only Con about this policy is that if the policyholder/owner dies after the policy expires and he/she didn’t renew it, nothing will be paid (no benefit will be paid out) to the beneficiary. Thus, the policyholder needs to keep an eye on the expiration date. There are 3 basic types of term life insurance: Level, Increasing, and Decreasing. Level term is the most popular choice. Anyway, it will depend on your preference, plan, and lifestyle. Regardless of the type of term insurance purchase, the premiums stay the same through the entire length of the policy; only the amount of the benefits may change, depending on the type of term insurance you choose.

I love this policy because it is affordable with high benefits, and you choose the length of it. Life changes!! You may only want the policy until your retirement as you start to receive benefits from the social security, 401K, and any other retirement investment accounts. Or if you have kids, you may only want the policy until they get to college.

Other policies I like are Joint life and Survivorship. I don’t want to make this post longer, so I will only mention that they are single policies designed to insure two or more lives. It can be in the form of Term insurance or Whole/permanent insurance (of course, now you know I’ll choose it in the form of the Term). These policies are awesome for married couples and business partners because the premium is based on the average joint age, so it is more affordable and ensures two people at the same time.

Know this! Joint life = first to die. When one spouse or business partner dies, the benefit will go to the other. Survivorship life = second to die. When the last spouse or the second business partner (survivor) dies, the benefits are given to the chosen beneficiaries (in the case of spouses, mainly the benefit goes to their kids).

Now that you have the knowledge, I hope you take the step to be financially secure and stable.