Household Minus One – Why Life Insurance? Which kind? How much?


By Helen Hartman, CRPC®
Redwood Financial Network, Solon, Ohio

Creating a financial plan and sticking to it helps pave the road for the family’s future. It is analyzed and adjusted through the years to address changing needs as time moves ahead. What happens to everything when an unexpected loss occurs in the family? Is your family protected for the unexpected?

When a family loses either the primary breadwinner or the primary care- taker, the effects on the household can be devastating. Any lose will have financial consequences which should be protected against. Each home needs an insurance plan based on household debt, annual income, age of couple, number of children, and age of children. All these items must be analyzed in order to create a life insurance plan to help the family. Life insurance is not only for the main breadwinner as the care-taker  will perform duties which must now be paid services. A life insurance plan must be created to help the household in the event of emergency.

Life insurance provides different types which are useful in different circumstances accordingly. The main types of life insurance are:

  1. Term Life Insurance- Life insurance that is purchased and provides coverage for a certain period of time. i.e. 10 year term life insurance, 20 year term life insurance, 25 year term life insurance… The insured selects a certain period of time the which the loss of income or role in household would be specifically affected- term of a mortgage, years children are growing up, etc. Term insurance holds no cash value and drops when the term is up. This insurance is generally the lowest premium for a given coverage.
  2. Whole Life Insurance- Whole life insurance provides coverage for the life of the insured. In addition to providing a death benefit, whole life also contains a savings component where cash value may accumulate. These policies are also known as permanent or traditional life insurance. Whole life policies premiums are based on the age at issue. In most cases, the younger you are the lower the premium. There may be withdrawal benefits to whole life insurance as well.
  3. Universal Life Insurance- Life insurance created in the 1980’s and offered primarily in the United States that combines low cost protection of Term Life Insurance with a savings portion invested in an interest- bearing tax deferred account. Universal Life provides flexibility where the policyholder can adjust the premium amount and coverage according to the current age and income needs.
  4. Variable Life Insurance- Variable life insurance allows the policyholder to invest the cash portion of their policy in stocks, bonds, and/or money market portfolios. The annual premium is fixed like whole life insurance but the cash portion is not held in interest bearing money market options only. The death benefit will rise and fall according to portfolio performance.

Protecting your family against the loss of an integral part of the family must be planned. The choice of which kind(s) of insurance is best for your personal situation is very important. Sit down with a trusted financial advisor to review your insurance needs. Make sure the proper amount of coverage and type of insurance is used to protect your unit. Have it reviewed and revised as needed.

This article was written by Helen Hartman, Chartered Retirement Planning Counselor(CRPC) an Investment Advisor Representative of Redwood Financial Network in Solon, OH.