Securing Your Financial Base Module 4 of Family Financial Freedom
Truth about Life Insurance
1. Products and financial services provided by
American United Life Insurance Company®
a OneAmerica® company
The truth
about life insurance
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Exploring 10
misconceptions
about life insurance
You have a lot of choices with your money — how to
spend it, where to spend it and how you might lay a
foundation for today’s goals and tomorrow’s dreams.
Making financial decisions can be overwhelming, but
the choices become easier with the right guidance and
a big-picture view. Starting with the firm foundation of
life insurance may be a good decision.
You may already have some life insurance, likely
offered through your employer. Like most people, you
have considered purchasing additional insurance
protection, but you’re unsure whether you can afford it
— and whether you and your family even need it.
To help you understand how life insurance can lay
a firm foundation for your life’s journey, let’s look at
common misconceptions.
Take a read, assess your own perspective and answer
a few questions to determine if life insurance makes
sense for you.
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“Isn’t life insurance only
for after I am gone?”
Life insurance provides a benefit when you’re gone,
but that’s not all it’s for. First and foremost, it helps
your family tackle the future, financially, without
you. In essence, life insurance helps protect
your goals for your family. Your dreams for your
children, business and spouse don’t go away if you
pass away. Life insurance can help make those
plans a reality.
Depending on the life insurance policy you
purchase, you may accumulate cash value to
help you reach your goals in your lifetime. Life
insurance can help you meet your retirement
income goals, fund your children’s (or
grandchildren’s) education, fulfill other dreams —
and address the unexpected.
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5. 5
“Is life insurance really
something I can afford?”
When you think of life insurance as an expense,
you can easily talk yourself out of purchasing it.
Consider the importance of your family and your
goals for them. Financial protection is important
in making those goals a reality. In the same way
you buy auto and homeowners insurance to
protect your valuable assets, why not protect those
who depend on you?
You have many affordable options in financial
protection. In fact, the cost of insurance may
surprise you. Considering certain criteria, such
as your age, health and type of coverage, life
insurance may cost just a few dollars a month.
You may not realize that life insurance can help
enhance your other assets over the long term.
Permanent life insurance with an accumulating
cash value can give you the freedom to enjoy your
life’s journey and pursue new adventures.
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“Shouldn’t I buy term insurance
and invest the difference?”
If you’ve ever said or heard this, ask yourself:
1. How will I invest the difference?
2. Am I disciplined enough to make
that ongoing investment?
We all have good intentions, but might find
ourselves spending the difference on enjoyments
like clothing, vacations and improving our standard
of living. On top of that, investments have risk — in
some cases, we risk losing our entire investment.
When considering cost, term life insurance is
initially cheaper than whole life. One of the most
popular forms of term protection has a cost that
increases every year; other forms have a level cost
for an initial time period — 10, 15, 20, 30 years,
etc. After that, the term cost increases every year
and can become more expensive than other types
of coverage. The cost for whole life is guaranteed
never to increase.
Depending on your budget and long-term goals,
you may find it makes good financial sense to
purchase both term and whole life insurance
protection. Perhaps you want some coverage
for a short term, such as to pay off the mortgage
if something happens to you — and you may
want to secure some lifetime protection. Many
life insurance companies allow you to obtain
permanent and term life insurance coverage in
one policy.
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“Don’t I just need enough
life insurance to cover
my daily expenses?”
It’s true that you need enough life insurance to
cover expenses for your family. But your protection
also can help replace the income you would
have provided during your lifetime. Plus, your
economic value to your family goes far beyond
covering the car payment, mortgage and daily
living expenses. The care, support and love you
give your family also have worth. While no one
can replace you, you can help make a way for your
family by addressing the gap that would exist if
you weren’t there.
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“Is it true that I should purchase
life insurance equal to twice
my annual income?”
There is no magical formula to determine the life
insurance amount to purchase. Different tools,
such as life insurance calculators, are available to
provide a general sense of how much coverage you
want to have for yourself and your family.
Think of it this way:
If something happened to a loved one and it was
another person’s fault, you would want to receive
the maximum benefit amount possible. Nothing
can replace a loved one. Worth is not defined
by simple multiples of income; true value is the
culmination of all you do, love and provide.
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“Is the group insurance
I receive at work all the
life insurance I need?”
It is excellent to have group life insurance because
it does help provide income if something happens.
But in most cases, if you lose your job, quit or
retire, you will lose your coverage or be able to
convert only a portion to permanent insurance.
Based on your family’s goals, you should ask
yourself, “Is the benefit enough?” If not, consider
additional insurance.
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“Can people in poor health
qualify for life insurance?”
No one should assume coverage will be denied
based on an existing health condition. Insurance
companies assess risk individually. An individual
may be able to obtain coverage at a higher
premium or even qualify for a standard rate.
There’s no way to know until the evaluation
process is complete.
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“I’m young; why would I
need life insurance?”
It is easy to think you don’t need life insurance as a
young person. Yet purchasing life insurance today
can help you build your financial future — and
at a cheaper cost, because life insurance is less
expensive for younger individuals. Keep in mind
that if you don’t have a family or own a home just
yet doesn’t mean you won’t someday. Plus, life can
bring unexpected events, like health concerns,
which can limit your ability to have coverage when
you get older.
Obtaining life insurance protection at a young
age gives you more time to accumulate “living
benefits” in the form of cash values that can help
with a future home purchase, additional college
education or your dream wedding.
Regardless of the amount of expenses you have
today — a mortgage, car loan, student loans,
etc. — having life insurance can help ensure your
family isn’t burdened if something happens to you.
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“My spouse is the sole
breadwinner, and I stay home
with the children. Why would
I need life insurance?”
Both of you add economic value to your family
— not just the breadwinner. You both help your
family maintain a standard of living based on the
services you add by working, raising the children,
providing care and managing the finances. If
either of you unexpectedly dies, the surviving
spouse will have to make adjustments. The
homemaker would have to find a way to recover
the breadwinner’s income — which means
working while helping the family rebuild. And if
the homemaker passes, the working spouse would
have to take on the household responsibilities or
hire someone to help. Life insurance provides the
immediate and necessary income to help you and
your family rebuild without financial stress.
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“We’re age 65, empty
nesters, retired — and our
home is fully paid. Do we
really need life insurance?”
Congratulations! You’ve raised your kids, entered
retirement — and paid off your mortgage. Life
insurance provides your children a benefit paid
at death that can help represent the legacy you
want to give them when you are gone. Plus, having
permanent life insurance can help you meet
unexpected financial expenses, such as long-term
care.
Life insurance actually can help you on your
journey to a comfortable retirement. Depending
on the type of life insurance you chose, you can
use living benefits to help provide income to enjoy
your retirement. Plus, life insurance can help
enhance your other financial assets. You’ll have
comfort knowing that if you spend down funds
from annuities and qualified plans, your life
policy’s cash values can help you maintain your
lifestyle.
Life insurance also can help you preserve your
estate and fund your grandchildren’s college
tuition.
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Rest assured you are not alone if you’ve had
these questions and concerns. Life insurance
is commonly misunderstood. The more
you know about it, the better able you are
to make good decisions and navigate your
financial future.
What are your goals?
1. Do you want to leave a legacy for your family?
2. Do you wish to protect your income
in case something happens?
3. Are you exploring ways to create
additional retirement income?
4. Would you like to enhance your current assets?
5. Are you concerned that your employer-
sponsored life insurance may not
adequately protect your family?
6. Are you seeking to create and transfer wealth?
If you answered “yes” to one or more of these
questions, a life insurance policy can help you address
your goals.
Meet with your financial professional to
learn how to plan your financial journey.
The opportunities may amaze you.
Let us guide you