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Solopreneur Money

Jun 21, 2021

 Has anyone ever explained life insurance in a way that you can actually understand? I began my career in financial services as an agent for a large insurance company. After 20 years of working in the industry, I finally figured out a way to explain the incredibly complicated world of insurance in an easy-to-understand way. When you press play you’ll learn about the different types of life insurance through simple generalizations and real-world examples. 

You will want to hear this episode if you are interested in...

  • Hearing how a murder defense taught me how to explain life insurance [3:02]
  • Discovering how whole life insurance is like buying a home [6:25]
  • Learning a formula to figure out how much life insurance you need [8:10]

There are 3 basic types of life insurance on the market 

Term basically means temporary. I liken term life insurance to renting an apartment. Term life insurance is sold in increments. You could purchase this type of insurance in 5,10, 20, or 30-year terms. What this means is that over the course of the term your rate will stay the same. It is similar to when you sign a lease on an apartment. Once your ‘lease’--or term--is up you will no longer have insurance unless you renew it (at a different rate). If you die during that time period your beneficiaries will receive the benefit as long as you have paid your ‘rent’--your premium.

Universal life insurance gives you flexibility. The reason it is flexible is that you have the ability to decide how much you want to pay to have the insurance. It’s like a term life insurance policy, but with a money bag attached to it. You decide how much goes to the insurance and the rest goes into the money bag. That bag of money is then invested by the insurance company--or you--depending on the type of product you choose. Listen in to hear how universal life insurance is like driving a stick shift car. 

Whole life insurance is guaranteed for your whole life. The premiums are higher with whole life insurance since it is guaranteed for the entirety of your life. This is why I liken whole life insurance to buying a home. Buying a home is more expensive than renting, however, once you pay off your home you can stay there for the rest of your life. You pay more for whole life insurance, but you build equity in the policy that can be used at some date in the future. 

Which type of life insurance is best?

So which one is the best one? The one that pays! It doesn’t matter which kind of life insurance you buy. The point is, if you buy it and die, the insurance pays out the proceeds to your beneficiaries. Nobody asks which kind of life insurance you have when it is time to pay out--all that matters is that the check comes when it is needed. 

How much life insurance is enough?

If you are wondering how much life insurance you need you should estimate about 5-10 times the amount of your yearly income. If you would like a more accurate formula to use, reach out to me to discuss it. You can do this by going to and pressing the start here button. While you’re there click on the resources tab to subscribe to the newsletter to get access to the worksheets and templates to help you run your business better, manage your finances better, and improve your life. 

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