Life Insurance 101: The Best Way to Protect Your Loved Ones

Jen Ekblad

Life insurance is not exactly the most uplifting topic to discuss, but it is an important one. For this piece, I sat down with an expert in the matter: my husband, Dan Ekblad. Dan has been a licensed insurance agent in Eau Claire for over 35 years. He is licensed in all lines of insurance and securities license 6 and 63.

Who needs life insurance?

Everyone. And you shouldn’t wait any longer. Life insurance will never be cheaper than it is right now: Life insurance goes up in price with age. And, the longer you wait to get life insurance, the greater the chances of something happening to you before you are covered.

Why should children have life insurance?

Children should have it for a couple of reasons. First, purchasing a policy on a child can guarantee and lock in a rate for the rest of their life. And second, if it is purchased when they are young and healthy and things change in life, they are still guaranteed that insurance.

Parents with children should have 5-10 years of their annual income in an insurance policy.

Is life insurance a good investment?

Yes, life insurance is a good investment because it can protect your assets and give you the ability to pass on your assets. It also can protect your family from inheriting debt upon your passing. It is important to note that the life insurance death benefit is tax-free; there are scenarios where it can become taxable, but that is not common.

What are the different types of life insurance?

There are five main types of life insurance:

  • Term Life
  • Universal Life
  • Whole Life
  • Variable Universal Life
  • Group Life

The type of life insurance you choose really depends on how much you want to spend.

Term life insurance is a life insurance policy for which the premium remains the same for the term of that policy (e.g., 10 years, 20 years, 30 years, etc.). The policy does not end at the end of the term, but the premium increases.

Universal life insurance is a permanent policy that locks in your premium until the age of 120 or until you die. While it may cost a little bit more and normally does not build cash value, you are locking in your premium. There are no dividends paid.

Whole life insurance is the most expensive life insurance there is. The most common whole life policies are the Gerber Life policies. This type of life insurance is expensive because the insurance company is offering a guarantee of a specific interest rate and the money that you are putting into the policy. So why do it? Because it is a permanent policy that can build cash value and can pay dividends.

Variable universal life insurance is a unique policy. You pay one premium, but the money is split up. Part of the money goes to the guaranteed death benefit. The other part of the money goes into a subaccount which is being invested in mutual funds inside the policy. Why do this? People who have this type of life insurance can loan themselves money out of the subaccount without affecting the death benefit and there is no penalty for doing this. But, here’s the catch: If you overfund this policy too much, it becomes a Modified Endowment Contract (MEC) which basically turns it into an annuity and makes a portion of the death benefit taxable.

Group life insurance is a policy you can receive as an employee benefit. It is inexpensive, as it does not require much underwriting. Typically, with a life insurance policy you are required to answer questions about your health history, height, weight, and current medical conditions and you are subject to a blood test and urinalysis. But a group life insurance policy usually means guaranteed issue with limited underwriting. The drawback is that you can’t take it with you. Once you leave the company, you lose your policy.

Can I be turned down for life insurance?

It is possible. People can be turned down for many reasons such as excessive weight, tobacco use, drug use, diabetes, high cholesterol, kidney failure, and cancer. When you purchase a life insurance policy (not including group life insurance), the underwriting tests are paid for by the life insurance company.

Where can you buy life insurance?

There are three basic ways to buy a life insurance policy: you can buy it directly from a life insurance company; through your local insurance agent; or online. With online options, life insurance has become very affordable and easily accessible to all. One company, Bestow, offers term life coverage starting at $5 per month. A few other companies who offer instant life insurance policies online include Ethos, Haven Life, and Ladder.

Life insurance is the best way to protect your loved ones. Don’t wait another day to buy your life insurance policy.