Life Insurance Basics:
Learn Why You Should Own It

Learn life insurance basics in order to determine which type you want, how much you want, and how you are going to utilize it. What I have learned is that most individuals aren't aware of how life insurance fits into one's personal financial blueprint.

Learning life insurance basics is a big part of our personal finance education. It involves more than weighing the pros and cons of term vs whole life insurance. It takes a deeper understanding of its purpose.

Wants Based vs. Needs Based

What we want...

bread

What are needs? When we truly thought about needs, we realized that we were talking about the bare minimum: bread, water, a roof, etc.

But we want abundance. We want to give more to our family. We want to leave them with more than the bare minimum.

I want the maximum possible for my family. What do you want?

One thing that you may have been taught about life insurance is that you should buy based on your needs. While this may work with some personal finance needs, it shouldn't be used when you buy life insurance.

I remember my financial advisor asking this question:

If you knew you were going to die tomorrow, how much insurance would you buy?

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Of course, my wife and I answered, "As much as we could get."

Keep this concept in mind because it will be very important when you select your policies. Select your life insurance based on wants and not on needs.

Needs analysis only considers the beneficiaries while wants analysis emphasizes the value of the insured.

Life Insurance Terms

No one expects you to know life insurance jargon. I know that when my wife and I started researching life insurance basics, we came across a lot of life insurance terms.

It may take some time, but I think it's imperative that you learn these terms so you can make informed decisions. We'll explore terms like:

Ironically, the most important term you may need to understand is term insurance and it's true cost.

Life Insurance Tips

Once you learn some life insurance tips, you will begin to see the advantages of whole life insurance. It's the type of insurance that we prefer. But it's important that you establish a foundation of knowledge so you can truly see its living benefits.

Then, you'll see why I ignored typical 401k advice. I stopped contributing to my 401k plan, took a 401k withdrawal, and started buying cash value life insurance.

Learning life insurance basics is important because you will begin to see how this underutilized tool can be turned into a tool of production.

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