Two things are guaranteed in life—taxes and death. One of the most difficult challenges for families to handle is the death of a loved one. There is a painful void and a long, healing process that takes place. There is also a realization of a harsh but undeniable truth: In most cases, when a loved one dies, so does his or her income.
Let’s refer back to 2 Kings 4:1–7. We talked about the woman who was in debt and the creditors were coming to take her sons. Her husband was dead, and she did not have any way to pay her bills. We do not know how she got into this position, but we do know that her needs had to be met. All she did was obey the prophet of God and, immediately, her situation turned around. Often God answers your need–immediately. I wrote that to say this: Yes, God gives us miracles and He can allow us to experience His supernatural presence. However, we have a responsibility to try to prevent our lives from spiraling out of control. God can and will deliver and comfort in your time of loss. How does God want us to meet the needs of our family? Proverbs 13:22 says, “A good man leaveth an inheritance to his children’s children…” Good man is defined in this scripture as someone who is agreeable, pleasant, happy, prosperous and upright. A good man leaves his inheritance to others since he cannot take the riches with him or her. In my estimation, your inheritance in this time of life is insurance. We should leave something to those who are remaining. Having insurance does not negate God’s sovereignty or ability to take care of your loved ones. It provides protection for your family in the future. It is a legacy you can leave your family. They will remember you because you have left them in better shape than they could have been. Life insurance is used to support the living survivors until the rest of the family is stable enough to replace the missing income of that loved one. Or it can be used as another part of the wealth building plan. You can get any type of insurance for any price at any time. You have to realize that insurance is one of your building blocks for the investment pyramid. Let’s look at the steps to build this strategy.
Determine what type of life insurance is needed through an insurance agent. There are many types such as term life, cash value, or variable policy, etc. You want to pick an insurance company based upon reputation and its credit rating. The reputation should be based upon customer service and its ability to meet your needs in times of distress.
If you want something basic and low cost, term life insurance is the winner. It is popular and is offered by all insurance companies. It is cheaper in your early years and expensive as you grow older. The policy is extended over a period of time such as ten, twenty, or thirty years. The major advantage in term life insurance is that you can insure yourself for a lot less money. With term life, you cannot withdraw money from the value of a policy. This is a temporary insurance specified for a number of years. When the policy expires in terms of years, you will have to renew. Most term insurance policies can be converted to whole life or other cash value forms of permanent life insurance that do not limit the upper age of renewability or coverage.
If you are looking for a policy to build wealth while living, try permanent life insurance. It’s different from term life because this life insurance remains in effect for the entire life of the insurer. Permanent life insurance has two components. The first is the death benefit and the second is the cash value of the policy. The death benefit is the same as the other types of insurance; it is determined on how much one buys. The other component is cash value.
Cash value enables the life insurance companies to make policy loans available to the policy owner, usually within a few days after the policy owner requests them. Cash value is a savings account that allows wealth to be built through the payment of monthly premiums. With this type of feature, you can borrow money from the policy. You can retrieve money out of the policy as a loan. The payments of this insurance can be twice as much as term life due to the fact that this life insurance never expires. There are several other factors that are beyond the scope of this column – see your advisor for more information.
The next step in selecting insurance is to determine and buy the appropriate amount needed. A simple rule of thumb is to buy about five to six times your current income.
Again, all of this depends on the needs of your household. Instead of estimating the amount, you can have an in-depth analysis completed by your insurance agent therefore your amount could be more than five to six time your income depending on the situation.
Here are some questions to remember when you estimate the amount of insurance to purchase.
1. Does the insurance cover your funeral expenses?
2. What bills and unresolved debts are remaining for your family when you pass?
3. Will your family have enough income for the next couple of years after your death?
4. Do the kids have enough tuition money to attend college or to give them a start in life?
Again, if you don’t have the answers to these questions, contact an insurance agent. Go back and review your policy to determine if you need to buy additional insurance for something that you may have missed.
Finally, seek and get insurance that will leave a legacy for your family. What you do now will benefit your children’s children?
Cedric Dukes is the author of Hostile Takeover – Manifesting God’s Plan and Purpose for Your Finances and newly released book, The Power of Time. You may contact him at www.cedricdukes.com.