Life Insurance and Fortune Cookies

The other day, I took my kids out to get teriyaki and we all got fortune cookies, which is – clearly – the best part of the meal. My 2 year old daughter crunched open her cookie and gave me the fortune to read to her. I about spit my water out it made me laugh so hard. It said “You will never need to worry about a steady income.”

This might be the best fortune from a fortune cookie EVER. It would for sure be the best ever if it were true. It made me think: “what would it be like to not have to worry about a steady income?” Or . . . what would it be like to not worry about anything? I am, by nature and trade, a worrier. Law school is, essentially, a place where they train you to think about the worst case scenarios. In my business, the worst case scenario (death) is inevitable; as such, it’s something a lot of people worry about.

As I’ve grown older and done adult-y things like having a full-time job, borrowing money to buy a house, getting married, having kids, and having weird aches and pains in my joints, I find that the worries build up. One thing that has successfully mitigated my worries is . . . cue the “I’m super old” music . . . INSURANCE. I feel like I have insurance for everything. There are the basics, of course, like homeowners’, medical, dental, etc. I also have disability and overhead insurance if I can’t work. But the one that helps me sleep at night is life insurance. I joke that I’m worth more dead than alive because I have a very good life insurance policy that ensures my husband (or kids) will get a chunk of money when I die. It helps me sleep because I know they will not have to worry about money after I’m gone. At least for awhile.

There are some creative life insurance policies, but the two major forms of life insurance are term and whole. Term life insurance is the type that exists for a number of years (e.g., 10-30 years) and usually has a set annual premium that is paid until the policy expires. Whole life insurance is a policy that exists for the remainder of the holder’s lifetime, as long as the annual premiums are paid, and it has a cash value, which is accrued over time. Whole life insurance is usually much more expensive than term life insurance.

There are certainly a lot of reasons people get life insurance, but I find a major motivator is to ensure a mortgage can be paid off upon the death of one spouse. That erases a (large) monthly bill and allows the surviving spouse to figure out next steps with less financial pressure. If you’re interested in obtaining life insurance, you should talk to your financial/investment advisor, who can help you assess the type and amount you should purchase, based on your situation.

From an estate planning perspective, life insurance is an awesome asset to own. As long as you pay the premiums and meet other terms of the contract with the insurance company, your named beneficiary(ies) will receive the death benefit upon your death, tax free. The cherry on top is that life insurance proceeds are not subject to claims of your creditors, which means the proceeds cannot be used to satisfy your debts after you die. This is why we call it a “super asset”! To note: life insurance proceeds are included in your “gross estate” for estate tax purposes, so it is also a major reason why people may have a taxable estate (see https://www.orbitwills.com/blog/proud-to-be-an-american-even-if-it-means-paying-estate-taxes for more information about the estate tax).

Unless you, like my 2-year-old, have received a prophecy that you’ll never have to worry about money, it might be worth looking into a life insurance policy for you and your family. Just make sure the beneficiaries mesh with your overall estate plan. ????