Retirement and the Basics of Life Insurance

There is a lot of uneasiness and nervous feelings surrounding people’s retirement plans these days for a number of reasons.  One primary reason for the coming alarm is the diminishing ability of the Social Security program to help senior citizens with the cost of living due to the growing number of retirees compared with the shrinking number of contributing citizens to the Social Security funds.

With government help fading for those soon to be retirees, more and more people are searching for new ways to plan for the day when they will leave their careers behind through retirement.  Before this can happen, however, an individual or couple must feel secure in their financials in order to be fiscally stable moving forward.

To accomplish this financial security, there is a trend emerging out of the working middle class that involves retirement minded saving plans. With more people changing to this fiscally minded retirement type of mentality, there continues to be a need for those people to be informed on new and inventive ways to save for retirement.

Save For The Future

It is important, however, for these individuals who are working now to save for the future to understand that there are not set guidelines on how to appropriately save money for retirement.  And there are multiple ways in which to do so, many of which are common knowledge and may already be in use by people looking to save but can still be used to spark other inventive methods for saving.

One way to smartly prepare for the future is to get yourself out of debt now.  By proportioning more of your paycheck towards the payment of debts, you will be able to save hundreds, maybe thousands, of interest dollars over the course of the loan.

Once debt free or even before, an individual can explore options of investment that will return more on their savings than will a standard interest rate provided by a savings account at a bank.  One such investment option is to explore differing 401 (k) plans and manipulate those plans to your utmost advantage.

This can be accomplished by placing the maximum amount of money into the 401 (k) that will be matched by the employer.  Companies will have varying percentages for which they will match an employee’s contribution into their 401 (k), but all will do so, so one should take advantage of this essentially free money.

It was said earlier that investments should be considered over holding all of one’s money in a bank’s savings account.  But this is not to say that one should empty their savings accounts entirely as these definitely have their place in preparing for the future, but people should diversify their savings in investments that could bring the profit of hundreds of thousands of dollars over the course of a few decades of investment.

Another investment option that may not be considered by those planning on retirement is a whole life insurance policy. In fact, life insurance in general is a necessary step in preparing for the future, but an individual first needs to understand the basics of life insurance before they can make a responsible decision concerning the purchase of a life insurance policy.

With all the potential assets that a person needs to protect through insurance, perhaps the most important is one’s own life.  Because of the benefits that a life insurance policy can provide to loved ones and family members, many people choose to take out a life insurance plan from an insurance company.

Buying Life Insurance Can Be Overwhelming

But for first time buyers, the entire process of purchasing life insurance can be overwhelming and confusing.  The purpose of this blog post is to give a starting point to those who are just beginning to explore their options in potential life insurance policies so that they can build a stable financial base for their future and for their retirement.

As a reminder, we at Check City and Insure Utah are available for all your Utah insurance needs, including life insurance.  Come in to any Check City location in Utah to talk with our knowledgeable staff and let them answer any life insurance questions you have.

Firstly, there is more than one type of life insurance policy that is available to insurance buyers.  In fact, there are multiple types of policies available but, in general, all life insurance plans fall within two main umbrellas of coverage, being either a term life insurance or a whole life insurance policy.

In a much generalized description, Term life insurance policies work like most other insurance policies.  The subscriber will pay an insurance provider, like Insure Utah, a premium, and in return the policy holder is guaranteed a fixed payout in the event of that subscriber’s death.

Solely for an example to demonstrate the basic workings of a term life policy, a subscriber will pay a hundred dollar premium every month in return for a policy that will pay out a predetermined amount of $10,000 to named beneficiaries in the event of the subscriber’s death.  Those numbers are meant only for example and do not reflect current pricing of an insurance policy, but they do illustrate the concept of how a term life insurance policy works.

This type of policy should be used by those who only wish to compensate for the loss of income or for the cost of living for those whom they have named as beneficiaries to the policy, or those who will receive the insurance money after a claim has been filed.  This is an advantage for most persons as the payout costs do not fluctuate after being determined and can therefore be more reliable in payment than can a whole life insurance policy.

Choosing a term life policy should be considered by those who want the security of a fixed amount of money to be paid to beneficiaries in the event of death.  But there is another primary type of life insurance, whole life, which likewise has its own advantages.

A whole life insurance policy can be any number of arrangements or plans worked out with an insurance company but that all perform the same basic function.  With a whole life insurance policy your insurance provider uses a percentage of your paid premium to use as an investment tool in an investment portfolio.

For these types of life insurance policies, the monthly premiums are typically higher than they are for a term life policy as to allow for the insurance company to invest the excess money into an investment plan.  Whole life insurance plans therefore offer both the coverage of life insurance plus an investment of a percentage of your monthly premium rates; this is done with the hope of a generous return on investment that will be added to the payout of the policy should the claim be filed.

For an example, instead of paying one hundred dollars per month in premiums as did our term life holder in the discussion on term life policies, a whole life policy holder would pay one hundred and thirty dollars with the excess amount of thirty dollars being invested in different investment options determined by financial professionals.  In the event of death for our example whole life policy holder, the whole life policy would pay out the predetermined $10,000 (the amount used as the example pay out for the term life policy holder in the previous paragraphs) plus whatever money has been made from the investments.

Additionally differing from the term life policy is the ability of most whole life policy holders to withdraw funds from their whole life policies while still living.  The investment funds that have accumulated over the course of the whole life’s investment period can be drawn upon by the subscriber should they feel inclined to do so.

This, however, is not typically advised by most financial advisors because the withdrawn profits are then required to be paid back to the insurance company with interest.  It is in effect a loan on one’s own investment profits and acts as any other loan by putting the subscriber into debt.

This factor of having to pay back one’s own investment profits with interest causes most whole life policy holders to think twice before borrowing against their whole life investment profits.  So while it is a fiscal cushion that can be leaned upon in times of desperate need, the common consensus is to let the whole life policy build in capital without drawing on its reserves.

To determine which type of coverage is best for you and your family, consider your situation and which would be more beneficial in the event of death.  To answer any remaining questions you may have concerning both term and whole life insurance policies, come into any of our Utah Check City locations and visit with the representative of Insure Utah.

These professionals will be able to answer all of your life insurance questions and will be able to recommend a life insurance policy that will best suit your needs and the needs of your loved ones.

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