A fully realized financial plan can include investments, stocks, exchange-traded funds, and even real estate. In the opinion of Mark Hauser of Hauser Private Equity, the plan should also take time to assess the life insurance policy of the individuals involved.
Private equity principal Mark Hauser has helped his clients develop thorough financial and life plans for several decades. Along the way, he’s learned the information can form the conduit that leads to better outcomes.
In today’s discussion, Mark Hauser focused on the importance of life insurance, the varying policies available, and what steps should be taken to sign up for them.
Defining Life Insurance
Life insurance is a seemingly simple topic at a glance. Policyholders pay a regular premium in exchange for coverage. The policyholder and a third party, such as an employer, can pay for this coverage.
Throughout the policyholder’s lifetime, regular payments will ensure the continuation of coverage. Along the way, policies with more considerable death benefits or those covering higher-risk individuals will also see higher premiums.
When an insured individual passes on, at least one of their prior named beneficiaries will receive the contract’s death benefit or face value. A life insurance policy with a death benefit of $300,000 would send that same amount to the named beneficiaries.
The Different Life Insurance Policies
Life insurance policies are as unique as the individuals who need them. Mark Hauser breaks down the general consistency of a life insurance policy into two categories: Term Life Insurance and Permanent Life Insurance.
Term Life Insurance – This insurance policy lasts only for a predetermined range of time, typically between 10, 20, and 30 years. As the policy ages, the premium may rise, and renewals will see policyholders paying more than when they started. Some term life insurance plans can be converted to permanent plans.
Permanent Life Insurance – Permanent life insurance differs substantially from Term Life Insurance. This policy is more expensive and follows the policyholder throughout their life. This policy ends when the policyholder surrenders the contract or stops paying their premiums.
Pros & Cons of Life Insurance
Before making such a significant decision, Mark Hauser advocates a firmer and more thorough understanding of the pros and cons of a life insurance policy. Below are just a few of the concepts that policyholders should consider before making their decision official.
Advantages of Life Insurance
- Replace Lost Income for the Insured
- Reduce Financial Stress on the Family
- Enable Gifting to Preferred Non-Profit
- Loan Privileges For Permanent Policies
- Tax-Deferred Appreciation
Disadvantages of Life Insurance
- Older & Less-Healthy, Individuals, Pay Higher Rates
- Must Pass a Medical Exam
- Complicated Process Without Help
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