Understanding Life Insurance Options for Hourly Financial Planning Clients

Hi folks, got a good one today. This is the Sawtooth Mountains in the background and I'm on the other side here on the White Clouds. Been hiking this ridgeline, a little bit of snow, and I'm sitting here overlooking Antz Basin and Castle Peak, the highest peak in the White Clouds. It's a gorgeous day.

I want to share with you just a little bit about insurance, a basic insurance lesson. Watch the video here.

Permanent vs. Term Life Insurance in Financial Planning

There's two kinds of insurance in general that you can get. One is permanent insurance and the second is term.

What Is Permanent Insurance?

With permanent insurance, it's designed to last generally for the rest of your life. There's a couple caveats, but the idea is it's going to be there until you die, whenever that is. It's got two components:

- They take part of the premium that you pay and pay for insurance.

- Part of it goes for an investment portion.

The idea is eventually the investment will overcome the fees in the insurance and you'll start to have some savings there that you could access by withdrawal or by a tax-free loan.

What Is Term Insurance?

The second kind of insurance is term insurance. It lasts for a certain term — could be 10 years or 20 years or 30 years. The idea here is you're going to buy insurance, but just for the time that you need it.

That might be during the years that you're working, for example, because when you get to retirement you might have all the money that you need to take care of you and your family even if you pass away.

The benefit to term insurance is that it's significantly cheaper than permanent insurance. So, particularly for young families or folks that are a little shorter on cash flow, you can get the coverage that you need with term insurance.

Summing Up Insurance Options

So again, to sum up:

-Permanent insurance has an insurance and an investment component, and it's more expensive.

-Term insurance is cheaper and can get you the coverage you need at a lower dollar amount quicker, but it does end.