Estimated reading time: 8 minutes

Having spent my career in the life insurance and financial industry, I’ve met with thousands of people. With each meeting, I was intrigued as to what the triggering event was that led them in wanting to purchase a life insurance policy in the first place.

Each story was as unique as the individual.  As I would listen to each client, the one constant remained the same; they didn’t want to pass their financial liabilities onto their beneficiaries.

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The Two Types of Life Insurance

The difference between the two types of life insurance is quite simple to understand once you know what you’re looking for.

Temporary insurance (Term insurance), is in effect for a predetermined term-length. It’s pure insurance and doesn’t accumulate cash value.

Permanent insurance (Whole Life, Universal Life, etc.), is in effect for the duration of your life, accumulates cash value, and allows you to borrow from the policy.

If you’d like a little more insight as to the various kinds of term (temporary) life insurance available, as well as just how expensive a term policy can become, I encourage you to do your research before committing.

This same suggestion applies in the event you’re considering a universal life or whole life (permanent) life insurance.  Do your research.

As a side-note, you may have heard the “experts” recommend that you should purchase only one particular type of life insurance policy — this is wrong

One size does not fit all.

The issue with this kind of blanket-advice is that these experts don’t know YOU, or your particular situation.  What may work well for one family, may make absolutely no sense for another family. 

You’ll see what I mean as we delve a little deeper into the life insurance abyss.

Life Insurance is Not as Overwhelming as You May Think

Believe me, the topic of life insurance is less than riveting, I get it…  Adding the what-if scenarios, self-doubt, and that we’re facing our own mortality; it’s no wonder this topic gets put on the back-burner.

I say this with tongue-in-cheek, but the process of looking into a life insurance policy, and then actually applying for that policy is not nearly as scary as you might think. 

But, before committing to the idea of purchasing life insurance, you should first find out if there’s a true need.

Event Triggers for Life Insurance

When considering the purchase of a life insurance policy, it’s usually because of a triggering event, and the answers to these two questions must be known before proceeding.

What Changes Are You Expecting in the Next 12 Months?

Have Any of These Life Events Happened to You in the Past Year?

For a comprehensive checklist of the Event Triggers for Life Insurance (and if they apply to you) go to our resource library.

My follow-up question would then be, “Do you know the difference between temporary and permanent life insurance?”  And I have to tell you, most didn’t, which never came as a surprise.

Temporary vs Permanent Life Insurance

Since both types of life insurance serve a specific purpose, I would know early on as to which type of life insurance policy made sense based on:

  • Are there any existing (individual) life insurance policies in place
  • Is group insurance not available through an employer
  • Are there any minor children
  • Are there any mortgage(s)
  • Are there any outstanding debt (personal or business)

Temporary Insurance Reference Guide

  • Duration of the policy: predetermined term-length (10, 20, or 30-years)
  • Premium is locked in during the term-length (10, 20, or 30-years)
  • Premium is less expensive than Permanent Insurance
  • Does not accumulate Cash Value

Permanent Insurance Reference Guide

  • Duration of the policy: until end-of-life
  • Premium is usually locked in for life (unless it’s interest-rate sensitive)
  • Premium is more expensive than Temporary Insurance
  • Does accumulate Cash Value

Once the decision was made as to what type of life insurance policy would be purchased, that’s when it was time to get into the nitty-gritty and discuss what to expect next.

Factors of Life Insurance Premiums

  • Age
  • Gender
  • Smoker
  • Health History
  • Family Health History
  • Occupation
  • Extracurricular Activities

There can be subsequent questions depending on the answers given in the initial application, but these answers help alleviate the guessing game as to the type of life insurance that’s the best fit for you.

Many life insurance professionals may believe that no matter what your financial situation — there is always a need to have life insurance. I disagree.

I believe, and I am speaking for myself only, there are only two reasons when life insurance is not needed. Keep reading…

When Life Insurance is Not Needed

  1. When you are able to self-insure
  2. You no longer have any outstanding financial liabilities

As I mentioned in my opening statement, I have always been intrigued by the actual triggering event that led someone to purchase life insurance.

In addition to not wanting to pass any financial liabilities onto their beneficiaries, here are the 3 reasons someone wants life insurance.

Top 3 Reasons Someone Wants Life Insurance

1. Experienced Recent “Family” Death

These people were stuck with having to pay for the funeral. They not only felt the financial magnitude of the death, but they are also trying to figure out everything that still needs to take place after-the-fact.  

Not only had did they have to endure the financial drain, but they are also at the beginning stages of the psychological grief, as well as experiencing the physical pain.  

This usually follows after the funeral has taken place, and everyone has gone back to their lives. This is when the “new normal” begins without the deceased. 

It’s these same people who don’t want to be a burden to others. They want to ensure those close to them don’t have to experience what they have. 

Costs involved not only entail the funeral costs but final expenses in addition to all of the little things that creep in as well. 

Funerals are not cheap, I don’t care how simple they are.

2. Experienced Recent “Died Too Young” Death

The scenario with this story is that the individual was “so young and healthy” that there was no need for life insurance. Therefore, no life insurance policy was in place. 

This is where you are likely to see a GoFundMe account.  This is an account that’s set up asking for monetary donations. It then allows the family to pay for the funeral.

3. Experienced Recent “Illness/Disease” Diagnosis

This third and final reason is my favorite. When someone would call me, only to tell me they “couldn’t wait” to get a life insurance policy… instantly, I was intrigued. 

Trust me when I say this, this would always make for an interesting conversation.

That being said, more times than not, the person calling had just been diagnosed with an illness or disease.

What was happening is they were R-A-C-I-N-G  to secure a life insurance policy before their new and updated medical records made it to the life insurance carrier. 

Trust me on this one; NO ONE  is ever excited about taking out a life insurance policy on themselves – ever.

Putting Your Mind at Ease

I want to put your mind at ease regarding the topics we’ve covered, specifically, the last three. 

I’m sure these got you thinking about your personal situation. Thinking this way is totally normal, and again, I get it. 

If you have a current medical condition or did in the past, it doesn’t necessarily mean you are barred from ever having a life insurance policy now.

There is always hope!

That said, clearly not everyone  is going to be considered the “perfect specimen” in the world-of-life-insurance – and that’s OK! 

All it means is that dependent on your health/family history, etc., your premiums will be more expensive than the average “standard” person out there.  Not to worry, as it’s not nearly as bad as it sounds!

Life Insurance Highlights

  • Understand the type of life insurance you are purchasing
  • Ask a lot of questions
  • Don’t feel rushed into making a decision
  • If something doesn’t feel right — wait until it does!

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