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Business // Thinking Smart
David S. Chang

Which Life Insurance Is For You?

Benjamin Franklin once said “Certainty? In this world nothing is certain but death and taxes.” Although one cannot control death, one can control how to protect loved ones through life insurance. The proper amount of life insurance will ensure that they will have enough money to pay down debts, replace the loss of income and help pay for any estate taxes. One advantage is that the proceeds are tax-free. Unfortunately more than 30 percent of U.S. Households do not have life insurance and 50 percent are underinsured.

The two most well-known types of life insurance are term and whole life insurance. A term policy covers a specific time period up to 30 years. When the insured dies during the term, the beneficiaries receive the face value of the policy. This type of policy is the least expensive and the best “bang for your buck,” especially if you are in your younger years. After the term is up, however, the policy ends with no savings component returned to the insured.

A whole life or permanent life insurance policy covers the insured for their whole life. There is a savings component that can be invested in money markets, bonds or stocks. This type of policy also has a cash value that you can borrow against. The three most-common types of wholelife insurance are traditional, universal and variable. However, this type of policy is more expensive than term and should not be considered solely as an investment product.

Another type of life insurance is known as Return of Premium Term. This policy has a specific time period like term, but at the end of the term the insured receives all premiums paid toward the policy. If the policy is left in force, the beneficiaries will receive a percentage of the face value.

When looking for life insurance, make sure you obtain the right amount to cover the needs of your loved ones. Shop around, discuss the life-insurance policy with your loved ones, and reassess it with big career and life changes to determine if more or less death benefits are needed.

Start young, as the price you pay depends on your age, health and even your hobbies!

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