There are specific life insurance policies that can become a financial asset to you. Think of it like an investment account, such as an IRA or mutual fund.

Permanent Life Insurance

Permanent life insurance policies allow you to invest in conservative investments, like mutual funds or ETF’s. You can customize your investments, allowing your policy to align with your goals and risk tolerance. There are two types of permanent life insurance.

Whole Life Insurance

Whole life insurance is the most common type. This policy allows you to accumulate cash value. When you pay for the policy each month, a portion of it is placed onto a cash value account. This is basically a savings account component with the life insurance policy.  It is noteworthy that the premiums on these policies typically won’t increase over the life of the policy.

Universal Life Insurance

Universal life insurance is the second type that allows policymakers to grow an asset over time. What sets this one apart is that the premiums are not set and can change at any point. There is something called “variable universal life insurance” which allows investors to have more freedom over their investments. This could lead to higher returns in the long run.

How To Use Your Policy

To use your life insurance policy as an asset you must grow your investments and develop the power to borrow against what you have saved. These earnings are also growing on a tax-deferred basis.

• Use your policy as collateral for a loan: This will help you get approved for a loan or potentially get a better rate on the loan. This is a form of showing lenders that you are trustworthy as a borrower.
• Take a loan from your policy: You can borrow against the cash value of your permanent life insurance policy. When you do take a loan from your policy and it is not paid off by the time of your death, then that benefit is subtracted from what your beneficiaries would have received.
• Withdraw funds: You can simply take money from your policy that is cash. This is also money that will not be paid to your beneficiaries later. If your withdrawal is a large amount, then you may pay taxes from dipping into your investments.
• Option for accelerated benefits: This option is available in a time of severe medical emergencies.
• Surrender the policy: You can cancel your insurance policy and get back the cash value that you put in. Keep in mind to read the fine print, because often time there are quite high fees when doing this. Similarly, if you to withdraw from a retirement account early.

Matt’s Corner

Want to receive insights delivered directly to your inbox? Subscribe to Matt’s Corner for more insights and financial planning tips.

SUBSCRIBE NOW!

The post Life Insurance as An Asset appeared first on New Century Investments.

Throughout your life you come to milestones where insurance is a given, while others are simply encouraged. How do we know which ones to purchase and when? Insurance is a financial contract between an individual and an insurance company that insures you are protected from financial loss in severe circumstances. Insurance is another ever-changing area of life. Throughout different stages of life will require different policies and different coverage.

Insurance In Your 20s

Health Insurance

Medical debt is one of the largest sources of debt among US consumers. Most people cannot afford healthcare on their own. This makes health insurance very important to consider as you roll off your parent’s plan and enter your adult life. Fortunately, many companies provide health insurance plans for their employees. Health insurance is one that you will most likely always have.

Auto Insurance

In most states, auto insurance is required. There are different amounts of coverage that you can purchase, like liability and full coverage. Rates for auto insurance are tied to age, car make and model, driving record, location, and sometimes gender. If you are driving a car, you will need auto insurance.

Renters Insurance

If you are renting a home or an apartment, you will need renter’s insurance. Most properties require their tenants to have renter’s insurance. Renter’s insurance protects you from natural disasters, theft, and more.

Disability Insurance

This provides income should you be disabled and unable to work a job. If you are reliant on a paycheck to support yourself or your family, disability insurance is worth the expense. Employers typically offer policies for traditional workers, while self employed people take out an individual policy. Disability insurance should be prioritized until you exit the workforce and rely on your savings to live through retirement.

Insurance In Your 30s

Life Insurance

The age at which someone becomes dependent on you, for most in their 30s, is the age encouraged to get a life insurance policy. This could be a spouse, aging parents, or children. There is term life insurance and permanent life insurance. Term is when the policy runs out after a certain period and is typically recommended because it is affordable and straightforward.

Homeowners Insurance

When you purchase a home, it is wise to consider homeowners insurance because it covers everything from liability to the structure itself. Most mortgage lenders require you to have homeowners’ insurance. If you live in wildfire, tornado, or hurricane prone area, there will always be a higher premium.

Pet Insurance

At the end of the day, you might be willing to spend $10,000 if it means your dog will get better. This is not a necessity but could be worth considering for some people. Some plans cover up to 90% of your routine visits and vaccinations.

Insurance in your 40s

Long-Term Care Insurance

This may be a good idea for those who are aging or disabled and need professional help with daily functioning. Keep in mind that as you age you are more expensive to insure. It may be a good idea to consider long-term care insurance well before you need it, even if you think you may never need it.

To be insured is to protect you as an individual and anyone dependent on you in the face of perils that no human could afford. It can be confusing as you enter adulthood to know what is vital and what is not. Having the knowledge of what insurance is most important in your stage of life will bring a sense of security and peace to you financial well-being.

Matt’s Corner

Want to receive insights delivered directly to your inbox? Subscribe to Matt’s Corner for more insights and financial planning tips.

SUBSCRIBE NOW!

The post Understanding Insurance appeared first on New Century Investments.

Purchasing insurance in your single, young adult years can seem purposeless. Consider another perspective. Life insurance can be viewed as a strategy and a wise decision in your young professional years. Common reasons to purchase life insurance include:

• Having dependents who rely on you.
• A large amount of debt.
• Lock in lower premiums.

Lack of Life Insurance in Younger Generations

Only 34% of Generation Z report having life insurance. Over half of millennials have no life insurance at all according to Life Insurance Marketing and Research Association. Why do so many young people not have life insurance? The most common response is that it is simply too expensive or does not make sense if there are no dependents. The cost for life insurance is on average $300 annually, which is roughly $25 a month. This is not overly expensive when considering other subscription services or even gym memberships.

Why Get Life Insurance Now?

Choosing to purchase life insurance as a young professional does have its benefits. The younger and healthier you are, the lower premiums you can secure. These premiums stay low through the remainder of your life.

Purchasing life insurance will also protect the people you do care about if you were to unexpectedly pass. Your family members may receive some benefits for final costs, like covering the cost of the funeral. If you do have dependents, then it also ensures that they will be taken care of if they can’t pay the mortgage on their own or to fund your kid’s education.

Having a life insurance policy can also erase debt from your becoming your dependents burden to carry. You may also be able to grow a cash value in your policy that can be passed down or be accessed in your lifetime.

Employer Provided vs. Individual

Employer provided life insurance is great until you lose your job or decide to leave. Considering an individual policy could be worth it, because you do not have to worry about interim periods where you do not have coverage.

In conclusion, purchasing life insurance as a 20–30-year-old could be beneficial. You can lock in lower premiums and take a burden from your future self.

Matt’s Corner

Want to receive insights delivered directly to your inbox? Subscribe to Matt’s Corner for more insights and financial planning tips.

SUBSCRIBE NOW!

The post Buying Life Insurance as A Young Professional appeared first on New Century Investments.