We Help Successful Women Set Up Investment Plans That Produce All The Income They Need to Live Their Best Life, For Life.
Most of us spend the majority of our lives believing we’re too young to think about stuff like investments and insurance and savings accounts.
That’s a problem for old us.
While it’s never fun to think about getting older (or dying, for that matter), one of the best ways to alleviate stress and anxiety about the future is to plan for it.
And, yep, that means thinking about some things right now that aren’t super fun but are going to make your life easier later.
One of those things is life insurance.
But, we promise it will literally pay off in the long run if you take the time to do a deep dive into your options with us.
First of all, if you don’t already know, life insurance is a policy you can buy into that pays an agreed upon amount of money to your beneficiaries when you die.
It’s a contract that promises to pay a bunch of money — called a “death benefit” — to whoever you name your beneficiaries.
Put simply: you pay the insurance company, the insurance company pays your loved ones.
There are three main types of life insurance — universal, whole, and term.
Those words all kinda sound like they mean the same thing, so let’s break down the differences.
Universal Life Insurance
Just like health or car insurance, you pay a premium for your universal life insurance.
A premium is the minimum amount due each month to keep your policy “active.”
You make monthly payments and your insurance company keeps supplying you with insurance. Easy.
Universal life insurance premiums are typically low, so they’re an easy way to buy into life insurance without breaking the bank.
Because premiums are low, you can opt to pay more than the minimum required amount, which will accumulate in a kind of savings account.
The investment savings element of a UL plan – that’s what the cool kids are calling it these days – allows your insurance policy to accumulate “cash value.”
Just like a savings account, the cash value of your UL insurance policy earns interest based on current market rates or the minimum interest rate — whichever is greater.
The nice part is, you can access this cash value portion of the policy without impacting the death benefit that will be paid out at the end of your life.
The not nice part is, you’ll pay taxes on any withdrawals you make from the cash value of your plan.
The extra not nice part is your insurance company will get to keep any remaining cash value at the time of your death.
That means your beneficiaries will only receive the death benefit. All that other money goes to the insurance company — even though it’s yours.
While policy premiums are flexible and inexpensive, you might end up losing money in a variety of ways — either by paying taxes on withdrawals or by losing your cash value at the end of your policy.
Whole Life Insurance
Whole life insurance is similar to universal. It includes a policy with a death benefit and a savings component that allows cash to build up.
With whole life insurance, the money you add to the “savings account” by paying more than your premium can be invested in order to earn interest.
You can also access the cash you add to that savings pool while you’re still alive by withdrawing it or borrowing it in the form of a loan (which will of course be charged interest).
In this way, your life insurance policy serves as a source of equity.
But, whatever you don’t pay back on the loans you take out will be deducted from the death benefit payout at the end of your life.
Unlike universal life insurance, you can withdraw funds tax free up to the value of total premiums paid.
So, if you’ve paid $10,000 in premium payments over the course of your life, you can withdraw up to $10,000.
This reduces your cash value but not the death benefit.
Phew. Need that one more time?
Cash value = tax free, you can withdraw however much you’ve paid, and it doesn’t reduce the chunk of money your beneficiaries get when you die.
Loans = charge interest, plus anything you still owe at time of death will be deducted from the money your beneficiaries are supposed to receive.
Now, I’m gonna muck it up even more for you. Blame Susan.
If you want to turn your whole life policy into a stream of income, you can do that by converting it into an annuity.
You do this via a 1035 Exchange so that the gains that have built up in the policy aren’t taxed when you convert.
Converting your whole life policy to an annuity obviously means no more death benefit but can be a way to get additional retirement income.
But know that the income is taxed and we’re not big fans of annuities.
Term Life Insurance
Term life insurance is a little more straightforward (and probably your best bet). You pay a premium that’s calculated based on your age, health, and life expectancy.
Just like other policies, term life insurance guarantees payment of a death benefit to your beneficiaries. However, rather than covering you for your entire life, it only pays your beneficiaries if you die during a specified term or period of time.
These policies have no savings component. They’re just a policy with a death benefit. If you die during the term of the policy, the insurer will pay cash to your beneficiaries (usually not taxable) that can be used to settle healthcare and funeral costs, debt, or other outstanding financial worries.
However, a term life insurance policy can expire before your death — if it expires, there’s no payout.
You can renew your term life insurance policy, but the premiums will be recalculated with your new age, health, and life expectancy factored in.
So, you might end up paying a higher premium than you did when you first took out the policy when you were younger and healthier.
This is the least expensive type of life insurance.
Depending on health and age, you can get a 20-year policy with a payout of $250,000 for as little as $20-30 per month.
Any other type of policy with those benefits is going to cost upwards of $200 per month.
If you combine this with smart investing decisions and a Roth IRA retirement plan, you could be looking at being financially set not only for life, but for death, as well.
Start Planning Now
We know it’s complicated, but we believe you can do it! Make a plan now so that you’re worry-free when you’re old and cool and living your best life.
And if you’re still stressed and confused (aren’t we all), you can always ask us for help. We’re here for you, babe!