7 Things You Must Know About Life Insurance!
An FAQ with Danny Crum
Hey, everybody, I’m Mike with Local Impact. I’m sitting down with Danny from Bray and Oakley. Danny, if you don’t mind, take a second just tell the people about Bray and Oakley?
Absolutely. I’m Danny Crum, and I’m the Vice President of Sales here at Bray and Oakley Insurance. And I take care of all six locations. I’m in charge of the sales, marketing and making sure that Michael, I take care of all his problems.
Well today, we’re going to talk about life insurance, Danny, so we have a couple questions. People are asking “what is life insurance”?
1 .What is LIfe Insurance?
Life insurance is one of the most important products to me and in our agency as well. Because it’s insuring your family. All right. So you insure your home, you insure your car, you insure your business, and you insure your life with life insurance. So what you’re doing is you’re planning to if something did happen to you that your family can absorb the expenses, and things that’s left behind.
Awesome. So what is term life insurance?
Term Insurance is something that you’re gonna hear a lot of, it’s one of the most popular products. Term is a fixed policy. All right, what I mean by that is you’re purchasing a certain amount of coverage for a certain premium. And if it’s a fixed life policy, that means it does not fluctuate. And there’s terms to that. So it can be a 10 year policy, a 20 year policy or a 30 year policy. For example, let’s say you purchase a $100,000 face value policy for 20 years. So when you purchase that policy, after you go through the medical exam and questions and things like that, and the policy takes effect, then that policy will stay in effect for 20 years. All right. If nothing happens to you in that 20 years, the policy just dies, it’s gone. It’s no more there’s no cash value to now, of course, if you do decease, it pays out. But it’s a fixed policy for a certain amount of premium for a certain amount of years.
Sure. I guess people do that for cost savings?
Yeah, it’s Yeah, cost savings. And you know, I can’t ever say that one life insurance policy or product is better than another because it really depends on your basic needs. A term policy is great. For some people, a whole life policy is great for some people. And that’s where you get down and you speak to an agent. And we can really, you know, I have a lot of times I have people call here for a whole life policy or a term policy. And once I get talking to them, I’ll kind of recommend based on what they’re telling me, one or the other. It could be completely different than what they called for, but you know, each policy has its place. And yes, a term policy is less expensive, usually than a whole life policy.
Yeah. whole life, people hear it and the first thing they think of as cash value. So with a term policy, there’s no cash value to it, there’s a face value, right? So you’re purchasing this insurance, you’ve got this base value. If you’re deceased, the company pays out. If it doesn’t, and you outlive the policy, then it just expires. A whole policy is exactly what it says: a whole life policy. So you’re going to pay a certain amount of premium for maybe a lower face value, let’s say 50 to $100,000. But everything you’re paying in over the course of years will build cash value. So there’s some cash involved in it, right. So if you never, say a term policy lasts for 20 or 30 years, a whole life policy lasts until you decease or until you exhaust the policy. So you’ve got a death benefit, and you’ve got a cash value, you can have either one of those, but you can’t have both. Okay, so you can either let the policy stay in force use the face value of the policy, or if you need to, you can withdraw the cash from and as it builds up. The trick to those in my opinion, is to make sure you’re leaving them in force enough to where eventually the cash value of the policy will exceed the premium you’ve paid in. That’s the goal. I like buying these for my kids, for instance, because they’re very young. As they get older, hopefully the Lord blesses them to live a long time, then this policy will actually be worth more in cash than we ever paid in premium. Really good policies. Yeah.
So you started to break the tip of the iceberg there. But can you explain how life insurance works?
Absolutely. And this is the personal side of life insurance for me. So if you buy auto insurance, there’s a chance that you may use your auto insurance, right? You buy homeowners insurance, you may use your homeowners insurance, if you got life insurance, you’re never going to be around to make sure that everything was taken care of. So that’s the personal side of it. A life insurance policy, you’re buying it for your family. And here’s where I really like, and encourage people to have an insurance agent. Because again, if your life insurance policy is active, if it’s working, that means you’re not here to make sure things are taken care of. And that’s very personal to us. And that’s why again, I think you should have an agent who can take care of this and make sure you’re getting everything that you need per se, making sure that the policy meets what your goal is, if you were deceased, and make sure your family is taken care of. But a life policy is exactly that, it works if you’re deceased. It’s left behind to take care of any final expenses and things like that, that you may leave on your family. If you’re a single, say you’re a single income family, and you’re living, or even a dual income family now things are very expensive. It depends on two incomes. So if you lose one of those, and you’ve got mortgages, and car insurance, and car payments, and college education and stuff like that, it can get very, very challenging, very expensive.
Sure. So how does someone gauge how much life insurance they need?
It’s a good question. And a good agent is key to helping you decide that. A lot of times I have people call me and they’ll say, Danny, I would like a quote on a $100,000 policy. Well, my first question is, well, how did you come up with that number? Well, it just sounded right. But there’s really more to it. You know, I want to sell you a policy that works just like your home auto or anything else. I’m selling you that policy with the possibility that you’re probably going to use it, hope you don’t, but you may. So again, having that conversation with your agent, and you know, we sit down and we try to find out again, you know, assets to expenses, you know, what do you have here. Are you both working? We have to supplement the income of the spouse, if you are, we have to pay off your home, we have to make sure your kids have money for college, we have to make sure we can bury you. And again, we’ll start adding some of that up. The one thing that I have found out selling life insurance is people will usually need a lot more than what they think they do. And the flip side of that is it’s typically a lot more affordable than what they think it is. Most people can afford much more insurance than they initially thought.When they come to me, they need a lot more insurance than what they initially felt when they came.
So is Life Insurance taxable?
It’s a good question. And it really depends on the product. We can get into a lot of that, but I’m sure you don’t want to hear me talk for 30 or 40 minutes, but it really depends. Term policies? No, they’re not taxable when you get anything that could potentially make cash you could get into tax to some taxable policies.
Awesome. Well, Danny, I appreciate you taking some time to talk to us today.
It’s been fun Mike. Thanks!
The type of life insurance that is best for you depends on why you need coverage. Life insurance is the only policy we can guarantee will be used. Bray and Oakley wants to make sure you and your family are protected. Contact us today to see how we can help.