Let us break this down 

1. You fall in love and have kids 

2. You decide to sign up for life insurance

3. You pay your life insurance premium every year

4. Some times passes and you keep paying your life insurance #goodboy

5. One day you have an idea to surf #hangtenbro

6. There are these killer waves but all of a sudden a storm hits #uhoh

7. You wipe out and start to swim but there is a shark behind you (wish it was an orca) 

8. A shark bites you #sharknado 

9. You die

10. Your family mourns your death 

11. Your spouse receives a lump sum cash payment from your life insurance 

Now let us piece this together, first, you find the spouse of your dreams and you decide to have kids, after having a kid you realize that it might be good to sign up for some life insurance. Years go by and you continue to make your life insurance premium payments. Now one day you decide to go surf like you used to before you had kids, there are some killer waves all of a sudden a storm hits and you fall off your surfboard and start to swim, uh oh there something behind you, uh oh it is a shark! and with one powerful bite, you are dead. Now your family mourns your death, but since you paid your life insurance premium every year, your spouse receives a lump sum of cash that was specified in your death benefit, and because of all this your family can live a comfortable life and your kids can go to college because you got life insurance.

The When and Why

Life insurance is often beneficial to look at when you start to have dependents, such as a spouse or children. This is because you want to make sure that they are taken care of just in case anything happens to you and your income. Some life insurance products can act as a savings strategy and could be a fit for both insurance and investment needs based on your situation. 

3 Types 

Term

• Set duration time of coverage (not till death)

• The only purpose is to insure for death 

• Cheapest and most versatile 

• Fixed payments for the term of coverage

Permanent – Whole Life

• Includes an investment component

• Covers till death as long as premiums are paid

• Pre-determined payments for insurance – fixed for life of policy

• Often called “cash value life insurance” 

• Builds a cash value that you can borrow against or withdraw 

• Money is built up tax deferred 

• Most Expensive

Variable – Type of Permanent with term costs and investment component

• Covers till death 

• Allocate premium payments to a separate investment account 

• Insurance company invest money for you  - you choose funds ( sub-accounts)

• Works like a security 

• Can borrow against your cash value

• Premium payments can vary

• May have to add more money into policy  - if not funded adequately

These are the three basic life insurance policy types that exist and each one as you can tell comes with different pros and cons. At the end of the day, it is what you want to get out of having life insurance. Orcas’ general rule to is having at least 5X your income plus college expenses covered for your family. If you want to learn more about what kind of life insurance is beneficial for you, please reach out here and we will get you in touch with one of our partners.