Life Insurance is A Crucial Part of Your Financial Plan: Here's Why


Financial planning is the process of achieving your long-term goals through proper financial management. It involves safety, wealth creation, contingency, emergency planning, and planning for specific life achievements. But where does life insurance come into play? The truth is that life insurance is an essential component of a sound financial plan. Life insurance may become more essential as you get older, marry, buy a home, start a family, and plan for retirement. Keep reading to learn more about why life insurance is essential to your financial goals.

Major Types of Life Insurance

When it comes to life insurance, there are two commonly seen options: permanent and term. In general, permanent policies cover the insured for the rest of their life, whereas term policies deliver coverage for a set period. However, despite whether one chooses term or permanent coverage, the death benefit avoids time-consuming probate deliberations and typically passes directly to the insured's beneficiaries with no income taxes.


Term Insurance Explained

Term insurance has premiums that are fixed for only a specified term, such as 10, 15, 20 or 30 years. After the initial instance term period is up, the premiums will rise according to your age. Often term insurance is used to provide funding for unfulfilled financial goals should something unexpectedly happen to you. Term insurance is often favored for younger individuals because the premiums are much lower than permanent or whole life policies. Term insurance does not accumulate cash, so the premiums go completely to the cost of insurance. The idea is to cover your loved ones with an inexpensive death benefit and continue to invest to build your financial assets. Eventually, you will have paid off mortgages, put children through school, and accumulated adequate retirement funds, so that an insurance death benefit will be less necessary. Oftentimes, individuals can purchase this type of insurance through their employers, called group insurance. This can be an easy way to access insurance, but it may not be portable if you change jobs.


Permanent Policies Explained

As opposed to term insurance, permanent policies are intended to provide lifetime coverage, with the two primary categories of permanent insurance being "whole life" and "universal life." Yearly premiums for whole life policies are generally higher than term policies, but they remain constant over the policy's life. Furthermore, in addition to covering the insurance premium for the policy's death benefit, a savings element of the premium payments contributes to accumulating cash value over time. The cash value of whole life policies, like other savings vehicles, earns interest and does so on a tax-deferred basis. Policyholders with universal life may have more options when it comes to premiums or the face value of the policy. Premium payments, for example, can be elevated, reduced, or delayed while also accruing cash value over time. Correspondingly, universal life policyholders may be able to change the policy's death benefit as their needs or conditions change. Permanent insurance is often used in conjunction with estate planning and other strategies that require insurance to the end of life.

Situations Where Life Insurance Can Help

Eliminating A Mortgage

Payments, taxes, insurance, and interest are all included. A mortgage is among the most significant expenses for the majority of people. As a result, many marriages shoulder this long-term financial commitment together. But, if you died tomorrow, would your family be able to cover such a significant expense without your revenue? A life insurance policy can ensure your family a lump sum of money to pay off mortgage debt, removing this substantial financial stress and the possibility of loan default or subsequent foreclosure.

Paying For Final Expenses

Traditional funerals in North America cost somewhere around $7,000 and $10,000 on average.1 Would your family have enough money to cover your funeral expenses if you died tomorrow? Possessing sufficient life insurance in your financial plan can cover these expenses, saving your family from investing in emergency funds, tapping into a retirement account, or taking out a loan during this challenging period.

Funding For College

For the 2021-2022 academic year, the average price of an in-state public college was $10,740 per semester for four years. The average price at a private college was $38,070.2 If you're struggling to save money for your child's education while still alive how would your family cope if you suddenly passed? You can pass your children the blessing of education by including educational costs in the death benefit of your life insurance policy. This can help alleviate the burden of rising college costs, ensuring adequate college funding.


Schedule A Consultation with an Experienced Financial Advisor

Life often can throw unexpected and sometimes life-changing events at us and upset the well-thought-out goals that we have concisely and deliberately planned for our families and ourselves. Insurance is one component, which can place a supportive foundation for your financial plan to help you, and your family deal with these unforeseen circumstances. At Fourth Avenue Financial, as an independent financial advisor, we offer various different Life, Disability, and Long Term Care Insurance programs, which are specially customized, to meet your insurance needs in those unique areas. If you are ready to start planning for your financial future, we are here to help. Contact us today at (304) 746 7977 to schedule a meeting with one of our experienced financial advisors or schedule online: https://calendly.com/fourthavenuefinancial/introductory-zoom.

Securities are offered through J.W. Cole Financial, Inc. (JWC) Member FINRA / SIPC. Advisory Services are offered through J.W. Cole Advisors, Inc. (JWCA). Fourth Avenue Financial and JWC/ JWCA are unaffiliated entities.



1 Protective Life Corporation, Importance of Life Insurance, https://www.protective.com/learn/how-is-life-insurance-important-in-a-financial-plan#:~:text=Life%20insurance%20not%20only%20provides,could%20appreciate%20the%20many%20benefits.&text=Financial%20planning%20is%20the%20process,proper%20management%20of%20your%20finances

2 College Board, Trends in College Pricing Archive, https://research.collegeboard.org/trends/college-pricing/report-archive

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