Chuck Groot Financial Consulting

Life Insurance

We all want what is best for our family no matter what. So many random things happen to all of us during our lifetime that we cannot possibly plan for them all, nor can we say for sure when we will pass on. In my family, things have changed in the blink of an eye — for good and for bad. What we can do is make sure that if we are no longer there to support our family financially, we have a strategy in place to make sure that our family will financially suffer as little as possible.

That is why we all need an insurance policy of some sort!

This policy is there to provide a lump sum of money to our beneficiaries to spend as they want. But generally, it should be enough to cover:

  • the ability to pay off your mortgage or provide enough money to pay rent till your youngest child reaches the age of majority;
  • enough money to pay off all of your debts;
  • sufficient funds to pay for the living costs (food, clothes, miscellaneous) that you were covering;
  • if you have children, enough to cover their sport, activities, and extras till they are 18 and enough to pay for their education; and
  • anything else that you can think of.

You don’t want to feel that your family will be in any financial hardship if you were not there.

When you add up all the numbers, you might be surprised at the amount you arrive at. But don’t worry, insurance probably is not a high as you think it will be. Not having it costs a lot more!

Types of Life Insurance

There generally are two classes of insurance offered: term insurance and other variations of insurance that include some type of savings benefit, dividend payment, and protection as part of their policy.

Term insurance

Term insurance, which, as its name implies, covers you for a set extent of time for a specific amount of benefit. This is the least expensive insurance offered and, not surprisingly, is the one that is most often purchased. Basically, you buy a policy for 10, 15, 20, 25, or 30 years at a specific benefit value and pay yearly or monthly premiums to cover the cost.

Needless to say, the older you are at the start of the coverage, the more it is going to cost, as the risk to the company is higher. If you were to pass away before the end of the term, the company will pay your family the lump sum agreed upon in a lump sum, non-taxable payment. If you do not pass away before the term expires, you do not have any savings component or money coming back.

In summary, term insurance has:

  • a specific time period;
  • a specific total benefit value; and
  • increased premiums based on length of the term.

Other Variations

The second type of insurance is a policy that includes some type of savings benefit, dividend payment, and protection. The policy heading fall under permanent life insurance, participating life insurance, whole life insurance, and universal life insurance.

Permanent life Insurance

This type of insurance:

  • covers you for your whole life;
  • provides a tax-free payment when you die;
  • includes costs that are usually guaranteed not increase over time;
  • often has guaranteed cash values that accrue to your policy; and
  • provides an opportunity for single life, joint first to die with survivor benefits, joint last to die two lives, or joint last to die — premiums to first death.

Participating life insurance

This type of insurance is similar to permanent life insurance, but it offers lifelong protection with an opportunity for tax-advantaged cash value growth.

Participating life insurance:

  • has a specific amount of benefit;
  • includes premiums that remain the same for life;
  • includes many plans that offer dividends with which you can buy more coverage, reduce your premiums, or take the cash;
  • ensures money from the plan goes to your beneficiaries tax-free; and
  • gives you the ability to borrow against the money accumulated in the plan.


Whole Life insurance

This is another twist on the theme of permanent life insurance. It has been called “straight life” or “ordinary life” insurance as well. Basically, it is in effect for your whole life as long as you pay your premiums on time and till the maturity of the contract.

Whole life insurance:

  • has a specific amount of benefit;
  • includes premiums that remain the same for life;
  • includes many plans that offer dividends with which you can buy more coverage, reduce your premiums, or take the cash;
  • ensures money from the plan goes to your beneficiaries’ tax-free from income tax but not necessarily estate tax.; and
  • The catch is your beneficiaries can either receive the insurance value or the cash value but not both.

Universal life insurance

This type of program melds the previous two programs together and adds a dash of flexibility into the mix.

With universal life insurance:

  • you have permanent life insurance;
  • there is an investment saving element;
  • beneficiaries only receive the death benefit or the accumulated savings;
  • you can adjust your premiums and death benefit as you go. It is based on paying the minimum to keep the policy in force, the COI (charges for mortality, policy administration, and miscellaneous expenses), your age, insurability, and the risk amount.

Although all of this may sound confusing, it really isn’t. You just need to determine how much you will need to protect your family, how long you want to be covered for if you want to include a savings or investment aspect to your policy, and how much flexibility you might need.

Please contact me about any questions you may have, help figure out your needs, and put your mind at ease. This is totally free, no-obligation on your part for anything, and I promise not to bug you in any way.