In our 10th episode, Paula Christine welcomes Danielle Workman of Lincoln Financial Group. We're talking about life insurance.
To reach Danielle at Lincoln Financial, you can give her a call at (248) 948-5187 or email her at Danielle.Workman@lfg.com.
To reach Paula Christine, visit her online at PaulaChristine.com or email her. Paula@PaulaChristine.com.
Paula: Hi, I'm Paula Christine, and welcome to Beyond the Paycheck. Living paycheck to paycheck and struggling to get ahead really sucks. But what if you could take control of your money and have that life you dream about? I know you're just saying. "Yeah. Right." But it can happen with knowledge and commitment.
That is my goal. To provide you with the knowledge to take control of your money. It's up to you to make the commitment. Today we're gonna talk about life insurance. It's not a fun topic. Nobody ever wants to talk about it. When a life insurance salesperson comes into the room, everybody runs, but it is a necessity.
It is something that you need to have to protect your loved ones. So I've asked my friend, Danielle Workman, she is a wealth advisor with Lincoln Financial, to come in and talk with us today about life insurance, the importance of it and the different types. Welcome Danielle.
Danielle: Thanks Paula for having me here today.
Paula: So we're just gonna jump right in. What is the purpose of life insurance?
Danielle: Thanks for asking Paula. The simplest thing to say is that life insurance is a benefit that you leave for your loved ones.If something should interrupt your life prematurely and give them the financial resources to take care of your family, your loved ones.
Paula: Does everybody need it?
Danielle: Well, you know, you're asking someone who unfortunately lost her husband 10 years ago, and that left me widowed at 40, with three children, two teenagers and an infant. And so I might be a little bit biased in my answer because I've lived it. I've lived the situation of what happens and unfolds when you've lost a breadwinner in your family.
So I would say that life insurance is incredibly important, especially when you have dependents who rely on your income.
Paula: Do you think a single person needs life insurance?
Danielle: Well, it's funny you should ask that. I bought my first life insurance policy when I was 21 years old. Was not married, had no dependents and lo and behold, that life insurance policy, many years later, provided some additional benefits that helped me pay for my daughter to go to college. It was an unintended reason for buying the insurance, but lo and behold, it really worked out.
Paula: And just so our listeners know, that is permanent insurance and we'll get into that definition and a little bit. Yeah, I even bought life insurance for my children when they were born for a lot of reasons.
And one, because, you know, you don't know at some point you become uninsurable. So what would cause someone to become uninsurable?
Danielle: They could have a health issue that makes them uninsurable. I had a friend who wanted to purchase some additional life insurance and redo her life insurance, and she was gonna attempt to get a little bit healthier and lose some weight before she applied.
And unfortunately, while she worked on that goal, got a diagnosis of breast cancer. And, you know, that obviously changed the picture because she was for a period of time, not insurable after that.
Paula: So based on that, do you need to be healthy to be insurable?
Danielle: You know, I appreciate you saying that. I think the best answer to that question is yes, reasonably, but I'd rather have somebody inquire at their current status then try to improve their health status and potentially not be eligible and have that go in the wrong direction for them. There are different rating classifications based on the health of the individual. And there are some people that are truly uninsurable, but I'd like to say it's best that you actually inquire, instead of assuming that you're not insurable.
Paula: When I apply for it. Do you ask medical questions? Do I have to take a physical? What happens?
Danielle: It really depends on how much insurance you're applying for and the type, because there are a lot of companies now that offer very streamlined underwriting. It might be a simple interview with the life insurance agent followed up by them checking the medical information bureau to see if there's any major diagnoses or medications that you take that would tell them a little bit about your health.
And followed up potentially with an interview with a nurse to ask all the medical questions that they find. But only if you're applying for large amounts of life insurance is a paramedical exam, or even potentially physician statements gonna come into play.
Paula: Okay. So you use some jargon there, and so let's break that down a little bit.
Danielle: Okay.
Paula: So paramedical is blood and urine tests?
Danielle: Yeah. It's somebody coming out to your work or your home, real convenient for you. Just a very short visit and they're gonna take blood and urine and also probably a few medical questions and height and weight, and just verify those basics.
Paula: And I do know the older you get, they do require EKG sometimes?
Danielle: Yeah, that's right. If they're gonna offer a very large death benefit for an older individual or one that has some medical issues, they might require additional tests. That's fair.
Paula: So we talked about why someone would need life insurance and what happens when you apply.
But when you're looking at the different types of life insurance, there's group, permanent, and term. Do you wanna go over,what those terms mean?
Danielle: Yeah, for sure. So group insurance is usually one that's offered through your employer and there's some benefits to that. One is usually it's really inexpensive, especially if you're under 50 and because it's being bought on a group basis, there's no underwriting questions whatsoever.
And so for somebody who might not be able to buy private insurance, it can be a great way to buy up some coverage. It might be a bit of it free from your employer, you know, a multiple of your income, or you might have the ability to buy limits not only on yourself, but maybe your spouse and your children as well.
And then, term insurance, just as the name implies, is buying insurance for a period of time that you have a need for that death benefit. Sometimes young families need or want a higher amount of life insurance while their kids are young or until they're out of college, but may not need it nearly as much, you know, just to take care of the remaining spouse. And so they can buy insurance for a period of time, a number of years.
And then permanent insurance comes in a couple forms, but let's just say that the purpose of that is really to hold that insurance for the remainder of your life. And some of those policies will build some cash value that can have some other benefits and have some other uses to it.
Paula: I know personally I have term insurance that actually expires in a couple years, which was to help my children get through college. And then I do have a small permanent policy that basically, will cover medical expenses or funeral costs when I do pass away. And that's how I've kind of handled it for myself.
Danielle: Yeah. I'm in the same boat there, Paula. I've got a larger policy because I have a 10 year old child that's still dependent on me, and I'm her only living parent. I wanna make sure that there's money available if someone else should have to raise her through college, as you've mentioned. But in addition to that, I do have a permanent policy that has built some cash value. And as I spoke of earlier, gave me the opportunity to take some of the value out of that policy and,use that towards my daughter's college education.
Paula: Yeah. Permanent policies that build cash value can be great tools not only for college, but sometimes even for retirement.
They're not for everybody, but something that you may wanna consider. So let's go into, now, I've decided I need life insurance, but I don't know how much. So how do I determine how much life insurance that I, I need to purchase?
Danielle: You know, that's a great question. And it can also come down to, what is your family situation?
Are you trying to take care of, as we've mentioned several times,, a young family that there's a lot of expenses in raising children? Is it to replace the income of a primary breadwinner in your family that you couldn't live without their income? And usually some kind of multiple of the, kind o, the time, number of years until you get past those high cost situations in your family.
In other cases, life insurance might be used for something like business partners where if a business partner were to pass away, you don't necessarily want the family of the deceased business partner to be involved in the business. And it can give that business, the opportunity to buy out that owner's share of the business.
Those are usually a funding solution for a buy-sell agreement for a business owner. And so the valuation of a business for example, can be another way to determine how much life insurance is appropriate.
Paula: And we also see like using life insurance too, for, you know, maybe a couple that's getting older and wants to make sure that they have money to leave to their children as an inheritance, because there are some tax benefits to inheriting life insurance.
Danielle: Yeah. Let's stay on that subject for a quick second. Life insurance passes to the beneficiaries tax free. So unlike some of the other assets that you might leave to your family, especially your children that could have some tax consequences, life insurance is a great way to give that tax free inheritance to your children.
Paula: Yeah. Who doesn't wanna pay no taxes? Exactly. That's the ultimate goal. Isn't it?
Danielle: It is indeed. Oh, can I add one more thing there? You were talking about an older individual wanting to leave this tax free benefit to their children or create an estate that passes to their children very easily, but the other benefit for an older family could be that some permanent life insurance policies also provide living benefits, which those living benefits can help pay for things like in-home senior care or the costs of long-term care, should those be needed.
Paula: Yeah. Those are great policies. Those those came out like probably about 10 years ago as another form of long-term care.
Danielle: Yeah. There's great policies that can be used for different purposes, which kind of brings up the fact that you may have bought a life insurance policy many years ago.
When you had that young family, it might have some cash value in it, and now your family is grown and gone. And you're wondering, is this life insurance still necessary? And some of those policies can be repurposed to fill the next need in life, which might be to take care of long term care or provide supplemental retirement benefits.
So if you've got an old policy that you've paid into for years, and you're not sure,, should I keep this or shouldn't I? It might be worth having somebody look at whether or not it can be reused.
Paula: Yeah. Great idea. So Danielle, if someone wants to get ahold of you and talk further about their life insurance needs, how can they reach you?
Danielle: Yeah. Great. My telephone number is (248) 948-5187. And I can be reached via email that's Danielle.Workman@lfg.com.
Paula: Thanks Danielle again for being with us. Danielle is a registered representative of Lincoln Financial Advisors Corp. Securities, and investment advisory services offered through Lincoln Financial Advisors Corp.
Thanks Danielle for joining us today. And please reach out to Danielle if you need to get a life insurance quote. You can reach me at Paula@ PaulaChristine.com. Or you can check out my website at paulachristine.com. Thanks again, Danielle.
Danielle: Thanks for having me.