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Life Insurance Explained
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The Give and Take
Life Insurance Explained
A Money Question
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The Give and Take
My Mom always taught me that if it sounds too good to be true, it probably is.
Well, turns out, like much of life, Mom was right.
You see, when it comes to money, I see this play out far too often.
It makes sense; we all want the quick fix.
You know the thing that will:
Save us money in taxes
Increase our net worth overnight
All while taking little to no risk
Well, as someone who has been pitched nearly every financial product under the sun ~ let me break the bad news.
It doesn’t exist.
Yet there is one product that is quite valuable but often pitched in ways it shouldn’t be.
You know, in those “too good to be true ways.”
That product is life insurance.
Today, I am going to walk you through everything you need to know about life insurance.
Let’s dive in…
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Life Insurance Explained
Let me be clear ~ Most families need some form of life insurance.
Yet it is one of the biggest rackets I see in financial services.
It goes something like this ~ “Financial Advisor” (loose term) is tasked with selling a certain number of policies each month for his company.
Turns out, when that is the incentive, it becomes a bit of the hammer and the nail.
Everything looks like a nail.
So the result is families owning life insurance policies that don’t suit their needs.
Again, before anyone gets up in arms, life insurance is incredibly valuable and should be a tool many use.
Today, I am going to teach you the different types, different use cases, and how I use it.
Types of Life Insurance
There are lots of nuances with life insurance, but at its core, it can be broken down into two buckets:
Term Life Insurance - A form of life insurance that lasts for a certain period of time.
Example: A 30-year term policy stays in effect for 30 years; after that, it goes away.
Permanent Life Insurance - A form of life insurance that lasts for your entire life.
Example: A permanent life insurance policy will stay in effect until you die (assuming premiums are paid)
So think of these two forms of life insurance as the cars you can choose between.
Then, under the hood, there are things you can customize.
A term policy:
Could be for 10 years or 30 years.
Could be for $500,000 or $5,000,000.
Could have certain riders or options available.
A permanent policy:
Could be for future income
Could be for future death benefit
Could be one of several different types of policies.
Yet even with all of that customization, it should still start with a basic premise:
What need are you trying to solve?
So let’s talk about some use cases for life insurance…
Use Cases of Life Insurance
The number one reason to buy life insurance is to transfer risk.
In fact, I would argue that for 99% of people, that is the reason to buy life insurance.
The biggest risk most families face ~ Loss of income due to death.
Example: A husband and wife with children earn $500,000 collectively. If either of them dies, most likely they would need additional funds to keep living their lifestyle.
Boom, life insurance, specifically term life insurance, can solve that need.
For most of us, income replacement is the main (and probably only) reason to buy life insurance.
There are other niche use cases, but they are far less common.
Outside of income replacement, the most common time we use life insurance is for estate tax planning.
Fun fact, the government taxes you on 40% of everything you own over $13.99M in 2025.
Now this applies to a very, very small percentage of the population, but life insurance can be a great tool for solving that problem.
Now I have heard life insurance pitched as a use case for all kinds of other things:
Retirement Income
Future College Costs
Tax Free Future Income
In an effort not to generalize, I will just say proceed with caution if life insurance is being pitched for anything other than income replacement or estate planning needs.
It might be a great fit in your situation (due to unique circumstances), but more often than not, the math would say otherwise.
So let’s talk about how I use it…
How I Use Life Insurance
I use life insurance in two ways:
Income Replacement
If either my wife or I passed away today, there would be additional money to cover expenses. We each own a simple 20-year term policy that will cover those needs until my kids are out of the house.
Business Buy Sell
Now, this is specific to business owners, but my brother and I own Moment. If either of us passes away, we have life insurance that will cover the cost of buying the other’s shares in the business. This ensures business continuity for clients, team members, and the health of the business.
That’s it…
There isn’t some other fancy way I am trying to leverage life insurance today.
There isn’t an investment component in my insurance strategy.
There isn’t anything other than solving for needs.
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I have a little extra fire around this topic, and here is why:
Life insurance is a great tool.
I would argue 99% of people need it in some form or fashion.
Yet the vast majority of people own the wrong type in the wrong amount for the wrong reason.
The reason behind that…It can be sold as that “too good to be true vehicle”.
So my recommendation to you is this.
Consider life insurance as a tool (especially if you don’t have any) in your financial life.
Just be sure you understand what you are paying, why you are buying it, and what need you are solving.
Oh, and if you aren’t sure, get an opinion from a financial expert who isn’t getting paid on it.
As always, my goal is to help you get smarter with your money.
You have worked hard for it ~ I want you to make the most of it.
Until next time, my friends!
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A Money Question
What need does your life insurance solve for?
Remember, this question is the prerequisite for buying life insurance in the first place.
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3 Ways I Can Help You
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Moment Private Wealth, LLC is a Registered Investment Advisor, located in the State of Missouri. Moment Private Wealth provides investment advisory and related services for clients nationally. Moment Private Wealth will maintain all applicable registrations and licenses as required by the various states in which Moment Private Wealth conducts business, as applicable. Moment Private Wealth renders individualized responses to persons in a particular state only after complying with all regulatory requirements, or under an applicable state exemption or exclusion. Nothing in this content is intended to be, and you should not consider anything in this content to be, investment, accounting, tax, or legal advice.