Protecting your family with life insurance can come in a variety of ways. However, it can be difficult and confusing to determine what protection your family needs without direction. Above all, we recommend talking to a qualified agent when considering any purchase of life insurance, but to simplify your search, below are three ways to protect your family insurance.
Option A: Survivor Purchase Option (SPO)
The Survivor Purchase Option Rider is an additional feature that can be added to your original whole life policy at the time it is issued. This rider provides the option for your loved ones to purchase a whole life insurance policy of their own at some future date.
To add this rider, you will first select a family member who is at least 20 years old. This family member can be anyone of your choice, not necessarily a spouse; and to qualify for the rider, the family member needs to undergo medical underwriting. After the SPO is added, the initial policy owner remains as the only one insured, but the family member named as the SPO becomes one of the policy’s beneficiaries.
Assuming that the beneficiary who is named on the SPO rider doesn’t precede the policy owner in death; they have the ability to use the death benefit to purchase a new life insurance policy on themselves based on the results of the original medical qualification.
Option B: Convertible Term Insurance
The convertible term insurance option allows your family members to buy temporary insurance at a significantly lower premium than that of a whole life policy. The advantage of a term policy is that it provides your family with insurance coverage for the least amount of money. However, the downside to term insurance is that it only lasts for a pre-determined number of years. Term life insurance can be looked at as life insurance you rent. It gives you coverage in the event of tragedy in which you pay a fee for. If you’re still alive beyond the 20-30 years coverage, then essentially all you have done is paid for security.
Also, unlike whole life policies, term policies do not create cash value. Most term policies, however, can be converted into a whole life policy. This can be done incrementally or all at once. These policies are often converted when families have unexpected increases in income, such as salary raises, an inheritance, or other windfalls of cash.
Option C: Whole Life Policy
Buying a whole life policy allows your loved ones to immediately get their own life insurance protection as well as build cash value for themselves. This option is ideal for children that are beginning to generate an income of their own. As they begin utilizing their policy to finance the expense of cars, college, marriage, or anything else, it can teach them a powerful cash management system that isn’t available in other financial plans.
Whether you have a whole life policy, a term policy, or use a rider, it’s important to ensure you and your family have protection. For any questions, call us at Paradigm Life.
– Eric Patterson
Read: Know Your Retirement
Watch: Infinite Banking Basics
Listen: The Many Uses of Life Insurance Dividends
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