Life Insurance Made Easy

Life Insurance You Don't Have to Die to Use

Most people don't like the thought of having to purchase life insurance of any kind, and most buy term life even though the death benefit on a term policy very often never pays out. I prefer to help clients understand the benefits of permanent insurance and how it can be used both while living and at death.

My preferred approach is Retirement Life — you don't have to die to obtain the benefits of using it. The policy has the following benefits:

• Tax-free accumulation of wealth
• Cash growth pegged to the S&P 500 stock index
• No downside risk — your money never goes backward due to market downturns
• Tax-free use of the built-up equity as a supplemental retirement vehicle
• A long-term care benefit included
• A critical illness benefit included
• A terminal illness benefit included

Any guarantees are backed by the financial strength and claims-paying ability of the issuer.

The Basics of Life Insurance

I believe more people would warm up to life insurance if they simply understood how it works and why one policy might be preferable to another. Broadly, there are a few main types: term life insurance (and return-of-premium term), whole life, universal life, and indexed universal life (IUL).

I generally prefer cash value life insurance, both to protect the family and as a financial tool to help supplement a client's retirement income. That said, I know term life is sometimes the right answer — younger clients who can't yet afford permanent insurance are still better covered with term than not covered at all. For clients who can afford permanent insurance but aren't sure they see the value, a return-of-premium term policy is a reasonable middle ground, since premiums are returned at the end of the term.

I'm a proponent of IUL policies (Retirement Life) for clients who want minimum guarantees on their cash value while still having upside growth pegged to the S&P 500 index — security and room to grow at the same time.

How Much Coverage Actually Makes Sense

There's no single formula that fits everyone, but a few questions consistently matter more than a generic income-multiple rule of thumb: Who depends on your income today, and for how many more years? Would your family need to replace income, pay off debt, cover future education costs, or all three? Does your estate plan rely on a life insurance death benefit to cover estate taxes or provide liquidity — see estate planning for how that fits together? The right amount of coverage comes out of answering those questions specifically for your situation, not out of a generic multiple of your salary.

Life Settlements

A life settlement is simply the sale of a life insurance policy to a third-party or corporate buyer — for someone who bought a policy, no longer needs it, and would like to sell it today for cash to use for any number of purposes.

People generally buy life insurance for one of two reasons: to protect the family in case the primary earner dies, or to cover estate taxes so wealth can pass to heirs. When those circumstances change — a spouse the policy was meant to protect passes away first, a divorce occurs, an intended heir becomes estranged from the family, or a child the policy was meant to benefit predeceases the parent — the original need for the policy may no longer exist, making it a candidate for a life settlement.

The other common reason to sell a policy is simply being unable to afford the premiums and needing cash — a common situation for retirees with rising medical expenses who've paid into a policy for years. Instead of surrendering the policy for its cash value, selling it can often net significantly more money.

While life settlements aren't a mainstream topic, they can be a valuable tool when looking at your overall estate and financial plan — worth at least a conversation before you let an unwanted policy simply lapse.

Common Misconceptions

"I'm single with no dependents, so I don't need life insurance." That's often true while it stays true — but insurability and cost are both tied to your health and age at the time you apply, not at the time you eventually need it. Waiting until circumstances change (marriage, a child, a health diagnosis) can mean paying significantly more, or in some cases not qualifying at all. "Whole life is always a bad deal compared to buying term and investing the difference." That comparison only holds up if you actually invest the difference consistently for decades, which research on real household behavior suggests most people don't. A properly funded cash value policy forces a discipline that a "term and invest the rest" plan depends entirely on you maintaining yourself. "My group life insurance through work is enough." Employer coverage typically ends the day you leave that job — precisely when you may be older and less insurable elsewhere. It's worth having coverage that isn't tied to your employment status.

Where This Fits Into Your Broader Plan

Life insurance rarely stands alone as a decision. It touches your estate plan, your long-term care coverage (some policies, including Retirement Life, can include an LTC-related rider), and your overall financial plan. I look at it as one piece of the whole picture rather than a standalone purchase decided in isolation.

Frequently Asked Questions