When I was a freshman in High School, I became close friends with Judy (not her real name) in my gym class. We were always the last two people chosen to be on any team because we were athletically challenged. Our bond grew from there. During the middle of our sophomore year, Judy met and began dating Steve (not his real name), a senior. They quickly became a “hot item”. I rarely saw Judy anymore because she was spending all of her time with Steve. Over summer break, I got a job as a math tutor and spent every weekend working as a candystriper at Misericordia Hospital in the Bronx, New York. On the Sunday before I returned to school, Judy surprised me by visiting me at the hospital. She said she had some very surprising news to tell me. I jokingly said, “you’re getting married, right”? Judy stared at me and said, “how did you know”? We both stood in the lobby of the hospital in shock! I was so happy. Not only was Judy getting married, but she was also four months pregnant. She asked me to be her Maid of Honor.After a lovely wedding, Judy took off a semester from school to have their baby. Judy’s uncle, who was an insurance professional, advised her to purchase Term Life Insurance. Even though they were both young and healthy, he explained the necessity to prepare for the unexpected especially since they were about to become parents. Judy and Steve got a Term Life Insurance policy with a $300,000 face amount.
Four months later, Judy gave birth to a beautiful daughter. Steve worked part-time while attending college. Judy stayed home and took care of their daughter full time and studied for the G.E.D. Things fell into place very nicely for the first eight months. Steve joined a softball league at work. He started to complain about getting very bad headaches, but attributed that to juggling a busy schedule. Eventually, Steve saw his doctor who prescribed some pain medication for his headaches. He was scheduled to follow up with the doctor in six weeks. Tragically, that never happened. Three weeks after Steve’s initial visit to his doctor, while playing softball, he got a migraine headache so severe that he was rushed to the hospital. He was unconscious and admitted to the intensive care unit. Steve had an aneurysm, went into a coma and passed away. Judy and the rest of Steve’s family and friends were devastated. Steve was only nineteen.
It was the one visit to his niece’s house that Judy’s uncle hoped he would never have to make. A few days later, he met with Judy and gave her a check for $300,000 (the face value of the term life insurance policy). It made all the difference in the world. Judy was able to provide a funeral. She was able to stay in her home and provide a college fund for her daughter. Judy was also able to finish her college education and became a paralegal. If not for the money from the life insurance policy, she would not have had the means to maintain a lifestyle she would have had if Steve were still alive.
The type of life insurance Judy had is known as Term Life Insurance. Term Life Insurance and Whole Life Insurance are the two most common types of life insurance.
Term life insurance provides protection for a specific period of time and pays a cash benefit if you die during the “term.” Term periods typically range from 10 to 30 years, with 20 years being the most common term.
Whole life insurance provides lifelong protection. As long as you pay your premium, the full face amount of money will be paid. Because it’s designed to last a lifetime, whole life insurance accumulates a cash value. Term life insurance does not.
When I moved to Florida from Texas in 1989, I worked at a hospital in Fort Lauderdale. During a lunch break, one of my fellow nurses mentioned that she is looking to buy a condominium. Another co-worker asked her how she can afford to buy a condominium at this time. She said that when she was born, her grandparents bought a whole life insurance policy for her and now at 28 years old, the cash accumulation from the whole life insurance policy was enough to provide a sizeable amount of money for a down payment. Eventually, she bought a beautiful condominium a few miles away from Fort Lauderdale beach.
It’s important to know that when you use the cash accumulation from a whole life insurance policy, it does not affect the face amount. When you pass away, your beneficiary will still receive the full face amount of money as stated in your policy and any portion of the cash accumulation that’s left.
It’s impossible to say which type of life insurance is better because the kind of coverage that’s right for you depends on your unique circumstances and financial goals. Sometimes a combination of term and whole insurance is the right solution.
I will be glad to answer your questions about life insurance and meet with you to discuss what may be the best solution for your particular situation.
