June 22, 2021

This paid piece is sponsored by First National Wealth Management.

By Adam Cox, chief wealth management officer

No one wants to think about dying. Of course, it’s a genuine concern. That’s why life insurance is one of the most important financial decisions we can make, but it’s also one of the most misunderstood.

There are lots of options and a heavy dose of jargon, which can make it overwhelming and confusing. Cash value, whole life, variable life, universal life and term life are just the tip of the iceberg. But the life insurance policy you choose can have an enormous impact on your finances.

On the latest episode of our podcast, “Common Cents on the Prairie,” we are joined by Jeff Zander, CEO of Zander Insurance, which happens to be the only insurance company recommended by personal finance guru Dave Ramsey. We discuss the differences between cash value life insurance and term life insurance and how you can decide which one is right for you. You can read a recap of our conversation here, listen to the entire episode by clicking the player below or find it wherever you stream your podcasts.

What is life insurance?

Life insurance offers a death benefit to the named beneficiaries if the policyholder dies during the term of the policy. The payout is intended to be used to pay any debt of the policyholder, take care of funeral expenses or allow any financial dependents to continue their lifestyle in the absence of the deceased person. Just like any other type of insurance, you pay a premium each month or year. However, beyond that, there are many different price points and features available. We’ll dive into that in the next section.

Zander Insurance shares the same approach to personal finance as Ramsey, which is why they’re the only insurance company he recommends.

“The debt element is a principle that we believe in (and we’ve learned it from Dave) that when you leave this world, you should leave it (at least financially) where you’re not leaving others behind that have been relying on you or that you left yourself in debt and those that extended that debt to you are left empty-handed,” Zander said. “So no matter where you are in the age spectrum, those are the two situations where we believe that life insurance is an appropriate expense to incur.”

What types of life insurance are available?

Now that we’ve established what life insurance is and why someone would need it, we now can talk about the different types of life insurance available. There are two main categories: cash value life insurance and term life insurance. The difference? Cash value policies can accumulate cash value, and term life insurance policies are just that: insurance for a set term. There are lots of differences in price and features between the two, and it can be confusing, which Zander said is by design. Be sure to listen to the episode to make sure you understand the differences and all the available options.

Does everyone need life insurance?

Zander Insurance believes that not everyone needs life insurance. Yep, you read that right: an insurance company actually admitting you might not need what it’s selling.

“Everybody doesn’t need life insurance,” Zander said. “Those that have debt, those that have family members relying upon them need life insurance. We pretty much draw the line at that point. We don’t see it as a tool for investing; we don’t see it as an inheritance mechanism.”

“If they were out of debt, they should take that money and invest it with you or a professional that’s going to give them options and that’s going to look at their particular situation and strategies and invest long term and do much, much better than what an insurance company would pay them,” he said.

With all this information, it can be hard to know where to begin, but selecting the right life insurance policy depends on your overall financial picture. If you need help with assessing your finances or planning for what’s next, our team at First National Wealth Management is passionate about helping people make better financial decisions. To start an initial conversation with us, send us a note through our website. We’d love to work with you.

Any comments, insights or strategies discussed in this article are intended to be general in nature and, therefore, may not be suitable for you and your situation, whatever that may be. Before acting on anything written here, please consult with your attorney, CPA and/or your financial advisor.