What’s easier for the average American? Building up a $100,000 cash savings? Or paying someone $100 a month?

This is the dilemma that must be answered for most people to understand how valuable life insurance is. Remember, money is not always about the opportunity but sometimes it’s about the opportunity cost. Think about it: the money we want to save to invest in a home, the dream school for our kids, or even a family get away; this money often gets drained when the unexpected happens. Whether it be medical bills from an illness or worst case scenario, the most fundamental purpose and reason for life insurance is to ensure that there is liquid access to cash in the case of an emergency (even if you’ve had a hard time building it up directly).

That is it. It’s very simple. Life insurance is an asset that protects your family financially if, or when, you’re not able to. If you’re ever to sick to work or if the unimaginable were to happen, life insurance gives us the peace of mind to know that our families would be taken care of. Now that is life insurance 101. That is the basics. The more nuanced use for life insurance is the ability to build, scale and protect your wealth using the insurance as an asset to compliment the wealth building journey.

Below, we will break down the different types of policies, when they’re useful and when they’re not!

Term Insurance

A term life insurance policy is the most basic form of life insurance:

• Coverage for a specific period (10, 15, 20, 30 years)

• Tax-free death benefit

• The most affordable type of coverage

• Includes living benefits that cover medical bills while living (if you get a term policy make sure you have living benefits included)

Term life insurance policies are not investments. Nor do they actively build wealth while you’re alive. Instead, term life insurance is the type of insurance that most people are familiar with. Coverage for a specific amount of time. If something unfortunate happens, your family gets a pay out. That’s it. It’s cheap and affordable and makes sure that you are protected in case of an emergency.

Who Is Term Typically a Good Fit For?

Term life insurance is ideal for people who need affordable, high coverage for a specific period of time — such as young families, primary income earners, or homeowners with a mortgage. It’s designed to protect loved ones during the years when financial responsibilities are highest.

• People on a budget — term is the most coverage for the lowest cost

• Young families—making sure your family is covered

• Homeowners — get your mortgage / rent covered in the case of a loss of income

• Those with temporary needs — parents that need coverage until their kids are of working age

• Young people in good health — the healthier you are the cheaper the rates

• Minimal complexity—good for those who just want coverage

Who Is Term Typically a NOT Good Fit For?

Term insurance may not be the best fit for those who want lifetime coverage, cash value growth, or long-term estate and legacy planning, since coverage ends after the term and has no savings component:

• Those who want lifetime coverage term expires after period is up

• People focused on cash growth term doesn’t include anything other than death and living benefits (again make sure your term has living benefits)

• Estate planning / legacy goals harder to guarantee legacy planning with expiring policy

• People who may not prequalify later if you outlive your policy you will have to re-qualify when you’re older. If you go through a health issue that makes you uninsurable this can be a major issue. Also term insurance will always cost much more the second time you apply due to age

• Those who want to use insurance to build wealth NOW term is for coverage only

Pro’s & Con’s of a Fixed Indexed Annuity