Since September is life insurance awareness month, this month I’m going to talk about life insurance.
Buy it when you’re young – as you get older and health issues come up, you can be prevented from purchasing a policy or end up with an extremely high premium.
You definitely don’t want to make my mistakes.
Long ago, I purchased a ten year term life insurance policy for my husband, and at the end of the ten years, the premium drastically went up. Unfortunately, due to health issues, he was uninsurable and couldn’t purchase another life insurance policy.
Do I need life insurance even if I don’t have kids?
I do think everyone should think about getting some life insurance coverage early on in their life. When you purchase a life policy in your early thirties, it’s usually inexpensive. Hopefully your health is great in your younger years, and since none of us know what our health will do down the road, getting it when you are healthy keeps the premiums lower and locks in a lower premium payment amount.
Even if you have no kids, most families depend on two incomes to help with paying the bills, so insuring each other will protect each of you if the other person dies suddenly.
There are different types of life insurance policies. Most people purchase term life insurance policies, which have a specified term for locking in your premium payment amount. For example, if you took out a thirty-year term policy, after year 30 your payment could drastically go up. Term life policies do not build cash value.
I prefer permanent life insurance policies, such as whole life or universal life policies that do build cash value. Cash value life insurance policies are a “multifaceted financial product that couples insurance protection with a savings or investment component, accumulating a cash value over time.” The Annuity Expert has a great article that goes into all the details on cash value life insurance.
Permanent life insurance policies will last as long as the premiums are paid, and the premium payment amount should not change over time. They offer lifelong protection and tax –deferred savings.
You probably receive life insurance offers in the mail every so often. Make sure to compare the numbers against other policies and do thorough research. These offers can often be more expensive than buying life insurance the traditional way and going through underwriting.
How much life insurance do I need?
There are many rules of thumb you can use to answer this question.
You could do 10 times your current salary, but that is likely to change. Also, you will come up with very different amounts depending on where you are in life. I do not recommend this method.
A better option is to use a life insurance needs calculator to help you determine how much life insurance you should carry. Also remember to factor in your spouse, whether they work or not, as what they do does affect your family.
If you do have a life insurance policy, remember to keep your beneficiary updated and make sure that the information is correct.
We’d love to hear from you – please reach out! We are here to help.
