Most of us spend a lot of time thinking about how to earn money, save money and enjoy it.
We spend a lot less time asking:
What happens to everything I’ve built if something happens to me?
That isn’t the most exciting question.
But it’s an important one.
We’ve all seen families lose someone unexpectedly and then have to figure everything out while they’re grieving.
Who pays for the funeral?
What happens to the rent or mortgage?
Where are the important documents?
Was there life insurance?
Who was listed as the beneficiary?
Was there a will?
Sometimes a family even has to start a fundraiser just to handle final expenses.
There is nothing wrong with asking for help when you need it. But if we have an opportunity to prepare ahead of time, we should understand our options.
That’s what PROTECT is about here at Savvii Savings.
Hi, I’m Savvii, and my goal isn’t to make you worry about everything that could go wrong.
It’s to help you become savvy enough to prepare for some of the things that can.
What Does It Mean to Protect Yourself Financially?
Financial protection is bigger than buying insurance.
It’s about creating a plan so that one difficult event doesn’t automatically turn into several financial problems.
Protection can include things like:
• life insurance;
• health, auto and homeowners or renters insurance;
• emergency savings;
• protecting yourself from fraud and identity theft;
• having a will;
• organizing important documents;
• choosing beneficiaries;
• protecting a business;
• deciding how property should be handled;
• planning who should make certain decisions if you cannot;
• and understanding how your family would manage financially if you died.
We don’t need to solve all of that today.
We’re going to start with something a lot of families don’t fully understand:
life insurance.
Life Insurance Is Really About the People You Leave Behind
Life insurance is an agreement between you and an insurance company. You pay a premium, which is the amount you pay for the coverage. In return, the insurance company agrees to pay a death benefit if the insured person dies while the policy is in force and the claim qualifies under the policy.
A death benefit is simply the money the insurance company pays after the insured person’s death.
The person or people chosen to receive that money are called beneficiaries. [1]
That money can help a family deal with financial responsibilities after someone dies.
For example, a family may need money for:
• funeral and burial expenses;
• rent or mortgage payments;
• everyday household bills;
• childcare;
• replacing income that disappeared;
• education costs;
• certain debts;
• or simply giving the family financial breathing room while they adjust.
Life insurance doesn’t remove grief.
But the right amount of coverage can help prevent grief from immediately becoming a financial emergency.
Whole Life Insurance: Protection You May Be Able to Use While You’re Living
There are several kinds of life insurance, and we’ll compare them properly in another article.
For now, I want you to understand why whole life insurance is something worth knowing about — especially when you’re young.
Whole life is a type of permanent life insurance. Permanent simply means it is designed to provide long-term or lifetime protection rather than coverage for only a certain number of years.
Why “Permanent” Matters
Here’s something important about permanent coverage: your health can change after you’re insured, but that doesn’t mean your existing coverage suddenly disappears because you became sick.
For example, if you develop cancer or another serious health condition after your policy is in force, your coverage generally continues as long as you keep the policy in force and follow its terms.
Getting covered before a major health change can matter because applying for a new policy afterward may mean higher premiums, different coverage options, or being declined altogether depending on the insurer and your circumstances.
That’s why I believe it’s worth looking into permanent coverage while you’re young and healthy if it fits your budget. You can’t always predict what your health will look like five, ten, or twenty years from now — and you can’t assume you’ll always be able to get the same coverage later.
Whole life isn’t automatically right for everyone, and approval isn’t guaranteed. But if you qualify for a policy you want, don’t assume you’ll always have the opportunity to get it later.
As long as the policy stays in force according to its terms, whole life is designed to provide a death benefit for your lifetime. It can also build something called cash value over time.
Cash value is money that builds inside the policy. (Hello, GROW opportunities!) Depending on the policy and how much cash value has accumulated, you may be able to access that value while you’re still alive. [1]
That’s one of the reasons I like whole life insurance.
You’re not only thinking about what happens to your family when you’re gone. You’re also building something that may have value while you’re here.
Why Starting Young Can Matter
One thing I think is especially important to understand is insurability.
When you apply for life insurance, the insurance company generally looks at factors such as your health, age, and other underwriting information. What you qualify for today isn’t necessarily what you’ll qualify for later.
Your health can change. Your circumstances can change. And a future health condition could make getting new coverage more difficult, more expensive, or potentially unavailable depending on the situation and insurer.
That’s one reason I don’t think it’s wise to look at life insurance as something you can simply put off until you’re older.
If permanent coverage fits your budget, getting it in place while you’re younger and generally healthier can give you something valuable: coverage you already have in force, rather than hoping you’ll always qualify for the same coverage later.
And if you want more coverage than your whole life policy provides, that’s where term insurance can come in.
Whole Life + Term Life
I’m not against term life insurance — I actually think it can be a great tool when you use it for what it’s designed to do.
Term life insurance provides coverage for a specific period of time, such as 10, 20, or 30 years. If you pass away while the policy is active, your beneficiaries receive the death benefit, assuming the policy is in force and the claim meets the policy’s terms. Unlike whole life, traditional term policies generally don’t build cash value.
One of the biggest advantages of term is that it can give you a large amount of coverage for a lower initial premium than permanent insurance. That can be especially useful during the years when your financial responsibilities are highest.
Think about a family with young children. You may want enough life insurance to replace your income, help pay for childcare, cover a mortgage, and give your family time to adjust financially if something happens to you. You might need $500,000, $1 million, or more in coverage — but you may not want to pay the cost of having that much permanent coverage.
That’s where term can make a lot of sense.
But here’s why I mentioned it second: I see term as something you can layer on top of a permanent foundation, not necessarily something you have to choose instead of it.
For example, you could have a whole life policy providing permanent coverage, then add a 20- or 30-year term policy while your family has larger financial obligations. The term gives you extra coverage during those high-responsibility years, while the whole life policy remains in place beyond the term period.
And remember: you aren’t limited to having one life insurance policy. You can have multiple policies with different purposes and coverage amounts, as long as you qualify and can afford them.
Term also isn’t something you should buy and forget about. When the term ends, your options depend on the policy. You may have the ability to renew or convert the policy, but the cost and available options can change. Your age and health at that point can also affect your ability to obtain new coverage.
That’s another reason I personally like having a permanent foundation in place when it makes sense financially. Term can give you more protection when you need it most, while permanent coverage can stay with you for the long haul.
So, if whole life is the foundation, let’s talk about one of the features that makes it different from term: cash value.
But here’s where I think people sometimes make it an either/or decision when it doesn’t have to be.
You can have both.
And if you’re going to have a whole life policy as part of that foundation, you should understand exactly what the cash value can — and can’t — do for you.
Is Cash Value on Whole Life Free Money?
Now we’re asking savvy questions!
Cash value can be useful, but it isn’t a pile of free money sitting there waiting to be withdrawn.Depending on the policy, you may be able to take a loan against the policy’s cash value. Policy loans can charge interest, and if you don’t repay what you borrow, the outstanding loan and interest can reduce the death benefit. In some circumstances, borrowing can also affect whether the policy remains in force. [2]
So when someone says:
“You can borrow from your life insurance!” Your next savvy question should be: “Okay… and what happens to my policy afterward?” That’s the kind of question I want you to learn to ask.
The Savvii Way to Look at Life Insurance
By now, you can probably see why I don’t think the question should simply be: “Is whole life better than term?” I’d ask: “What am I trying to protect, and what do I want this policy to do for me?”
Whole life can provide permanent coverage and build cash value. Term can provide substantial temporary coverage at a lower initial cost. And for some people, using both can make sense.
Your budget, age, health, family, income, debts, long-term goals, and the amount of coverage you need all matter.
So before buying a policy, this is where talking with a licensed insurance professional can be helpful.
Ask them to explain:
- how much coverage you’re getting;
- how much it costs;
- how long it lasts;
- whether it builds cash value;
- what is guaranteed;
- what isn’t guaranteed;
- what happens if you borrow against it;
- what happens if you stop paying; and
- what happens when a term policy reaches the end of its term.
The NAIC recommends talking with an insurance agent about your needs and the policies available to you, and notes that an agent can help explain policy terms and the application process.
And if you don’t understand the answer?
Keep asking questions.
That’s savvy.
Life Insurance Can Also Be Part of Estate Planning
We’ve talked about protecting your family financially if you die.
Now let’s talk about what happens to the things you’ve built.
Here’s another word that sounds more complicated than it is:
estate.
Your estate is basically the property and financial things you leave behind when you die.
That can include things such as:
- a home;
- vehicles;
- bank accounts;
- investments;
- personal belongings;
- business interests; and
- other property.
Your estate may also have bills, debts and other responsibilities that need to be handled after your death.
And here’s something important:
You do not have to be wealthy to have an estate.
If you own things, have accounts or have property that needs to be handled after you die, planning matters.
What Is Probate?
You may also hear the word probate.
Probate is a legal court process that can happen after someone dies.
When there is a will, probate generally involves determining whether the will is legally valid and giving the appropriate person authority to handle the estate.
When someone dies without a will, a different court process may be needed to determine who is legally allowed to manage and distribute the property.
The exact process, costs and rules depend on the state involved.
So let’s make the distinction simple:
Your estate
The property and financial interests you leave behind.
Your will
A legal document that states what you want done with certain property after you die. A will can also name an executor and, depending on state law, address things such as guardianship for children.
Probate
The court process that may be used to validate a will and handle certain property after death.
Those three things are connected, but they are not the same thing.
A Will Doesn’t Automatically Control Your Life Insurance
This is another distinction worth knowing.
Life insurance normally asks you to name a beneficiary.
That beneficiary designation matters because life insurance is a contract with the insurance company. Generally, the death benefit is paid according to that beneficiary designation rather than simply following the instructions in your will.
If the estate itself is named as beneficiary, the proceeds can become part of the estate and may be subject to the estate process.
That’s why choosing beneficiaries isn’t something you should do once and forget forever.
Marriage.
Divorce.
Birth or adoption of a child.
Death of a beneficiary.
A major family change.
These can all be good reasons to review your beneficiary information.
The NAIC recommends reviewing beneficiaries regularly, keeping their information current, and making sure trusted people know that a policy exists and where the policy information can be found.
You don’t want your family discovering years later that there was money available that nobody knew how to claim.
What About Taxes on Life Insurance
Here’s the simple version.
The IRS says life insurance proceeds received by a beneficiary because of the insured person’s death are generally not included in the beneficiary’s gross income.
But there are exceptions.
For example, interest paid on those proceeds may be taxable, and special rules can apply in certain situations.
That’s why we aren’t going to tell you:
“Life insurance is always tax-free.”
The more accurate statement is:
Death benefits are generally received income-tax-free by the beneficiary, but tax exceptions can apply.
When taxes or estate planning become more complicated, that’s when a qualified tax or legal professional becomes important.
A Will Kit Can Help You Start Organizing
Planning ahead doesn’t only mean buying insurance.
Your family also needs to know where things are.
That might include:
- insurance information;
- important contacts;
- account information;
- property information;
- your will;
- final wishes;
- important documents; and
- instructions about where certain records can be found.
A will kit can help you begin thinking through your wishes and organizing information.
But here’s an important Savvii note:
A will kit is not automatically the same thing as having a legally valid will.
States have rules about how wills must be created, signed and witnessed, and those rules aren’t identical everywhere.
A planning kit can be an excellent starting point. But if you have questions about whether your will is legally valid—or if you have children, a business, significant assets, complicated family relationships or special wishes—talking with an estate-planning attorney can be worth considering.
And Then There’s the Information Nobody Thinks About
Imagine your family knows you had life insurance.
Great.
Now they ask:
Which company?
Nobody knows.
Where is the policy?
Nobody knows.
Who is the agent?
Nobody knows.
Where is the will?
Nobody knows.
What’s the mortgage information?
What accounts exist?
Who should be contacted?
This is why something as simple as an organized planner can matter.
Your family doesn’t necessarily need access to every private detail while you’re alive.
They do need a safe way to find important information when it becomes necessary.
The NAIC specifically recommends keeping policy information somewhere safe and making sure beneficiaries or trusted advisors know the insurance company’s name and where the policy can be found.
And please don’t create an unsecured document filled with passwords, Social Security numbers and other sensitive information and leave it lying around.
Organize important information securely.
Protection includes protecting your information too.
If You Want Help Reviewing Life Insurance
And if you’ve made it this far thinking,
“Okay, but what does this actually look like for me?”
You don’t have to figure it out by yourself.
Savvii Savings can connect interested readers with a licensed life insurance agent who can learn about what you’re trying to protect and help you look at available coverage options.
The agent is the person who can walk you through the actual policy details, answer questions about eligibility and pricing, explain the available options, and help you understand what you’re considering before you apply.
That’s important because Savvii Savings is here to help you understand what to ask—not to tell you which policy you personally should buy.
Depending on eligibility and the current program available, you may also be able to ask about:
- available discounted-rate coverage;
- a complimentary will-planning kit; and
- a family-information planner designed to help organize important estate and end-of-life information.
Availability, pricing, eligibility and program benefits can change, so the licensed agent should explain exactly what is currently available before you make a decision.
Send me a direct message on Instagram so I can connect you with the agent! @savviisavings
And remember:
Getting a quote doesn’t mean you have to understand every type of insurance beforehand.
That’s what the conversation is for.
Ask questions.
Ask what it costs.
Ask how long it lasts.
Ask what happens if your circumstances change.
Ask what is guaranteed.
Ask what happens to cash value.
Ask what your family would actually receive.
A good financial decision is one you understand!
Protection Is Bigger Than Life Insurance
Life insurance is only one piece of PROTECT.
There is a lot more to explore.
Understanding Insurance
We’ll break down different types of insurance and what each one is actually designed to protect.
Estate Planning
We’ll explore wills, beneficiaries, trusts, powers of attorney and other planning tools without making them sound harder than they need to be.
Protecting Your Business and Assets
We’ll discuss topics such as separating personal and business property, business entities and why the way something is owned can matter.
We’ll also be careful here.
Creating an LLC or another business entity does not automatically protect everything you own or automatically lower your taxes.
Entity structure, taxes and asset protection can involve both legal and tax rules, so those articles will rely on trusted sources and professional guidance.
Protecting Yourself From Fraud
Scams, identity theft, account security and digital protection belong here too.
Protection isn’t one product.
It’s a way of thinking ahead.
You Can’t Control Everything—But You Can Make Things Easier
None of us can plan perfectly for every possible situation.
The goal isn’t perfection.
It’s preparation.
If something happened to you tomorrow, would the people you care about know:
- whether you have life insurance;
- who the company is;
- where your important documents are;
- whether you have a will;
- who they should contact; and
- what you wanted them to know?
If the answer is no, that’s okay.
Now you know where to start.
Your Savvy Goal for This Week: Start Your Protection Folder
You don’t need to buy anything this week.
You don’t need to create an entire estate plan in seven days.
Your goal is much smaller.
Start one Protection Folder.
It can be physical or securely stored digitally.
Put one page inside it.
On that page, write:
1. Life insurance:
Do I currently have coverage? Yes / No / Not Sure
2. Beneficiaries:
When was the last time I checked them?
3. Will:
Do I currently have one? Yes / No / Not Sure
4. Important documents:
Where could my family find them?
5. Important contact:
Who is one trusted person my family could contact if something happened to me?
Do not put passwords, Social Security numbers or other highly sensitive information on an unsecured sheet of paper.
Then circle one thing that’s missing.
That’s your next step. Maybe you need to find your old insurance policy. Maybe you need to check a beneficiary. Maybe you need to learn about creating a will. Maybe you realize you have no life insurance at all and want to request a quote.
You don’t have to fix everything this week.
Just find the first gap.
That’s a savvy move!
You’re becoming more prepared. And little by little, we’re making sure the things you’ve worked hard for—and the people you’ve worked hard for—are better protected.
Plan one thing. Protect one thing. Then build from there.
I’m proud of you, savvy saver.