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What are some of the benefits of having life insurance? | To The Point Q & A

If you are thinking of making a financial plan, what are some of the first things you should start doing now? ABC10's Alex Bell spoke with a financial specialist.

SACRAMENTO, Calif. — We can't predict what the economy is going to look like in the coming months, but we can prepare for it. ABC10's To the Point host, Alex Bell, spoke with financial specialist Shayne Corriea to chat about the key phases for setting up your financial plan.

Q&A with Shayne Corriea

Alex Bell: Shayne, we've been going over those four phases,  for people that may have missed it. Can you just recap what those phases are?

Shayne Corriea:  Absolutely. Phase one is identifying your goals, and taking a look at your relationship with money.

Phase two is risk management, and we talked about disability. 

(Phase) three is wealth accumulation. That's building your assets through real estate, retirement, etc. 

Then the fourth phase is distribution. It's the legacy piece.

Alex Bell: Last time we talked about disability, what are some other things that people should consider when it comes to risk management under that umbrella?

Shayne Corriea: The second most important thing under risk management is life insurance, protecting your family. We talked about disability, (and) whether or not your employer offers that benefit. Same thing with life insurance. Most employers offer a benefit of life insurance is usually one time your salary. The problem is, you may not be able to take that with you when you leave, maybe you get terminated or quit, and retire. So you need to get your own. And there's two types of life insurance that you can apply for term insurance and permanent insurance. So term insurance is like renting a home. You're leasing it for a certain amount of time. 20 years, right? You've heard of that? 20-year  term policy, it's inexpensive. Permanent insurance is more like owning a home, you build equity in it. So you get to own it, it's permanent, you'll have it for the rest of your life, as long as you pay the premiums on it.

Alex Bell: What are some of the other benefits to having life insurance outside of the tragedy?

Shayne Corriea: Life insurance (and) permanent insurance can play another key role in your retirement. You can earn what I mentioned earlier, like equity, you can earn cash value. And so what that is, is part of your premium goes into your own cash value fund, where you earn interest and it's compounding interest, year after year, based on what company that you're putting your money in, that you're paying your premiums to. So that cash value accumulates over time, and maybe in retirement, you decide to pull that out. It's tax-free money — all the money that you put into it — you pull out tax-free like a Roth. 

Some people do it for their children, for college, to buy a home, leave a legacy or generational wealth for their children. They take out a juvenile policy, build wealth over time, and then gift it to them when they're ready. 

Watch: The tax deadline for people who filed extensions is approaching | To The Point

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