WinterLife Blog

Why do I need life insurance?

Life insurance is a financial tool that provides a lump sum payment to your beneficiaries in the event of your death. Here are some reasons why you may need life insurance:

Overall, life insurance provides financial protection for your loved ones and can help to ensure that they are provided for in the event of your unexpected death.


How to choose the right type of life insurance

Choosing the right type of life insurance can be confusing, but it’s also an important decision. Here are some guidelines that can help you narrow down your best life insurance options.

Consider term life insurance if...

You need life insurance for a specific period of time. Term life insurance enables you to match the length of the term policy to the length of the need. For example, if you have young children and want to ensure that there will be funds to pay for their college education, you might buy 20-year term life insurance. Or if you want the insurance to repay a debt that will be paid off in a specified time period, buy a term policy for that period.

You need a large amount of life insurance but have a limited budget. In general, this type of insurance pays only if you die during the term of the policy, so the rate per thousand of death benefits is lower than for permanent forms of life insurance. If you are still alive at the end of the term, coverage stops unless the policy is renewed or a new one is bought. Unlike permanent insurance, you will not typically build equity in the form of cash savings.

If you think your financial needs may change, you may also want to look into “convertible” term policies. These allow you to convert to permanent insurance without a medical examination in exchange for higher premiums.

Keep in mind that premiums are lowest when you are young and increase upon renewal as you age. Some term insurance policies can be renewed when the policy ends, but the premium will generally increase. Some policies require a medical examination at renewal to qualify for the lowest rates.

Consider permanent life insurance if...

You need life insurance for as long as you live. A permanent policy pays a death benefit whether you die tomorrow or live to be over 100.

You want to accumulate a savings element that will grow on a tax-deferred basis and could be a source of borrowed funds for a variety of purposes. The savings element can be used to pay premiums to keep the life insurance in force if you can’t pay them otherwise, or it can be used for any other purpose you choose. You can borrow these funds even if your credit is shaky. The death benefit is collateral for the loan, and if you die before it’s repaid, the insurance company collects what is due to the company before determining what goes to your beneficiary.

Keep in mind that premiums for permanent policies are generally higher than for term insurance. However, the premium in a permanent policy remains the same no matter how old you are, while term can go up substantially every time you renew it.

There are a number of different types of permanent insurance policies, such as whole (ordinary) life, universal life, variable life, and variable/universal life. For more details, see our articles on the specific types of policies.



The Stay-At-Home Parent’s Guide to Buying Life Insurance

Whether you’ve always stayed home with the kids or you’ve recently transitioned to the important role of a stay-at-home parent, you probably know how vital your work is to the health and happiness of your family. So, what would happen if you could no longer be there for them in the way you are now?

One of the most comprehensive planning tools for keeping your kids secure is life insurance. It’s designed to be purchased now while you have some control over things and will kick in after you’re gone. Life insurance policies offer many benefits to your family, including a tax-free death benefit, a sense of financial and emotional security, and future insurability when your health may not be as certain.

1. Put yourself in your family’s shoes.

The first step of the process is often the most difficult—because no one likes to think about what life would be like if you weren’t around for your kids. Getting past the pain and discomfort is important, however, because you can’t truly explore all the options for life insurance until you’ve tried to imagine what a day or even a year in your family’s life would be like without you.

What needs will they have to meet? It probably goes beyond housework and cooking. From carpooling to tutoring to possibly even mental health services, the goods and services you provide to your family as a stay-at-home parent are valuable—and your family’s needs may be even greater in the future than they are now. Losing a loved one is disruptive and may require additional resources to help your family achieve healing and wholeness after you’re gone.

2. List out what’s needed—and what it costs.

After you’ve gone through the work of putting yourself in your family’s shoes, you have a better idea of the things they’ll need to pay for in your absence. You may have older kids and not believe they need certain services, but some extra help while they adjust may still be a good idea. Make a list of the items that will need to be initially purchased after you’re gone, along with ongoing needs the kids will have throughout their childhoods. Try your best to price these at a per-year price tag, and add extra each year for inflation.

Be sure to include any costs that your partner or other loved ones in the home may incur; you may even consider how aging parents or those who rely on you in other ways may need support, as well.

And don’t forget about funeral services, since these costs can run in the thousands!

It can be hard to predict all the costs, but a Life Insurance Needs Calculator helps simplify the process.

3. Consider ways to better your family.

While no one considers death to be a good thing, life insurance can be used to help your family move forward in some areas of their lives, even as they deal with your passing. Whether it’s paying off credit card debt or putting aside some college funds for the kids down the road, now is the time to think of your family’s financial responsibilities and put a plan in place for clearing these obstacles, if possible.

If your family lives paycheck-to-paycheck, you may not have much left over at the end of the month to put toward savings. Consider adding some extra coverage to your life insurance to help your family with an emergency fund; the larger life insurance payment could put them in a better financial position.

4. Research your options.

While it’s true that a good life insurance agent can walk you through everything you need to know about the policies they offer, doing a little research ahead of time can only help. You can get familiar with the terminology used when talking about policies, as well as get an idea of the different product types that are available. If nothing else, looking through life insurance articles and guides can inspire questions that you can write down to ask an agent when you meet.

If you don’t have a life insurance agent yet, this tool can get you connected to those licensed in your area and help you choose between them.

5. Prioritize the purchase.

At this point, you’ve done much of the hard work, and you’ve probably even talked to your family about what’s needed in the event you’re not around anymore. With that out of the way, you’re in a great position to meet with a qualified agent and get your insurance policy. Pricing tends to be better when you’re younger and in good health, so there’s an incentive to make your mind up and buy a policy sooner than later.

If, as you age, you decide you need more coverage or a different coverage type, that’s OK. Your agent can talk to you about the changes in your family to ensure you always have the right amount of coverage to help them succeed. Whether you add a new baby to the family or you want to increase your policy coverage to account for inflation, your insurance agent can walk you through what’s needed to always have adequate coverage for every new season in your family’s life.



Should I buy life insurance on my child's life?

The main reason for buying life insurance on anyone’s life is to replace income “lost” or pay for expenses caused by the death of the insured person. If your child dies, there’s no lost income, but there will be a funeral, burial, and related expenses that could run to thousands of dollars, which might cause financial hardship to the parents of the deceased child.

Another reason for buying life insurance on a child’s life is to guard against the possibility that, when the child is older, he or she might not be able to buy life insurance because of intervening illness or other circumstances.

Still, another reason for buying life insurance for a child’s life is part of a program to teach the child financial responsibility. Typically the insurance is whole life insurance, ownership of which is transferred to the child when he or she turns 21.

Most insurance advisors recommend that families spend their insurance budget to buy life and disability income insurance on the parents first, before considering insurance for children’s lives. The death of a parent, particularly an income earner, could have financial consequences that are devastating compared to the financial effects of a child’s death.



Reasons for purchasing an annuity

Annuities can serve many useful purposes.

If you are in a saving-money stage of life, a deferred annuity can...

If you are in a need-income stage of life, an immediate annuity can...

Help protect you against outliving your assets. Social security pays retirement income for as long as you live, as do defined-benefit pension plans. But the only other source of income available that continues indefinitely is an immediate annuity.

Help protect your assets from creditors. Generally, the most that creditors can access is the payments from an immediate annuity as they’re made since the money you gave the insurance company now belongs to the company. Some state statutes and court decisions also protect some or all of the payments from those annuities.



What is an Estate Plan?

An estate plan is a crucial component of a person's overall financial and legal strategy. It is a set of legal documents that outline how a person's assets will be distributed after their death, and it can also include instructions for how to handle medical decisions and other important matters in the event of incapacity. Here are some reasons why an estate plan is so important: