How Life Insurance Helps Your Loved Ones Build Wealth
A lot of the time, we choose to take a proper approach to our finances not for our own sake, but for the next generation. Statistics and studies show that generational wealth plays a larger role in financial success than you may think. On a lot of levels, this makes sense. Things like starting a business or funding an education—signs we often associate with “self-made people,” have a cost of their own, and it’s a lot easier to get started when someone else is helping foot the bills.
There are a lot of ways to get the next generation started, but one method you don’t hear people talking about—perhaps because the subject matter can be a bit morbid—is life insurance. This is a mistake, as it can be a guaranteed way to help children, nephews, nieces, and grandchildren have a financial cushion to go into the next phases of their lives with, here’s how.
Even if you get a smaller policy, life insurance can be a way to keep your death from putting those you leave behind in a financial hole. Depending on how you pass away, you may be leaving behind a lot of medical costs or even outstanding debt, and depending on the nature of it, some of that debt may not be discharged, like if you had a relative co-sign, for example. A policy will allow the family to use that money to handle any of these types of affairs. Even if you were financially in good order before your passing, there’s still going to be the matter of burial costs. With all costs factored in, the average funeral service costs a family roughly $8,000 – $10,000. This can be a lot of money to put together, especially in a sudden event.
So, what exactly should you do to have your family get the most when you pass on? For federal employees, you generally have an option already laid out for you, FEGLI, also known as the Federal Employees’ Group Life Insurance. While this can be useful for people who don’t necessarily have another option for life insurance, there are a few things to consider. The major benefit of FEGLI is that it is cheap, but you pay for that by not building up a lot of cash value over the years. As a result, for younger people, it may make a nice option in case of tragedy, but isn’t a wealth-builder, really. For that, you need to look for other policies that let you invest in.
Life Insurance as a Federal Employee
The bigger question here, other than whether or not it is worth it to invest in life insurance, is what you should do as a federal employee. Most people have FEGLI as an option, but depending on your goals, you may want to pursue an alternative with Secure Choice. Our FEGLI alternative is a fixed premium plan with no medical exam needed, which can save you thousands of dollars. In addition, rather than losing coverage when you retire, you will be covered up to age 100.