PERSONAL FINANCE TIPS, VOLUME TWO:

FINANCIAL PYRAMID- LIFE INSURANCE

XEKE.com is often asked for personal finance advice.  Most of America has very limited knowledge about personal finances.  Sure, most Americans have heard of a 401k, IRA, Roth IRA, life insurance, 529 plans, bulls, bears, buy low/sell high, rollovers, etc.  The masses may be aware of the catch phrases from the evening news or business page in the local paper.  XEKE.com will focus on life insurance (boring, yes, but an absolute must).

First of all, the most important decision that an individual or family can make is to buy life insurance.  XEKE.com always advises to buy a small chunk of whole life insurance, and a very large block of term life insurance (based on need and income).  Life insurance IS for everyone.  Young, old, married, single, family, no family, life insurance is the essential building block of a responsible financial pyramid.  Before anyone can think about retirement or college savings, planning for the unexpected is a necessity. Many families could not afford living expenses (house, car, bills) if a parent died, let alone plan for college and retirement.  

Whole life insurance, or permanent insurance, has a premium that is the same for life.  The initial cost of permanent insurance is much higher than term insurance, but the rate stays the same when you are 25 that it is when you are 95.  Term life insurance is VERY cheap when you are young, and increases gradually over the “term” of the contract- one year, five year, twenty year, etc.  Many term life insurance policy holders cannot afford the rising premiums as they advance in age.  Whole life insurance is like the “Cadillac” of life insurance, everyone wants it, but not everyone can afford it.  That being said, it is very important to talk to an insurance agent.  Be sure to talk to a reputable insurance company, and avoid “Cha Cha Life of Del Rio, Texas.”  With life insurance, you truly do get what you pay for, so be sure to find an honest agent that you know and can trust.  



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