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6. Buy Term Life Insurance

Protect your assets in the event the worst thing in the world happens to you and your family. This also can be done much earlier in the process.

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Reasons      

 

Protect your assets

  • Life Insurance provides a death benefit to your beneficiaries in the event you pass away.

  • I know this is morbid to talk about, but it's very important to protect your assets during one of the most difficult times in your family's life.

 

Health Advantages

  • The cost of life insurance is based on your health - the healthier you are, the cheaper the premiums will be.

  • Typically speaking, the younger you get life insurance, the healthier you are deemed by underwriters, and therefore the out of pocket cost will be cheaper.

  • I'm a huge advocate for getting Term Insurance as soon as possible to lock in a good rate.

 

Tips       

 

What is Life Insurance and how does it work?

  • Life Insurance is a type of insurance that pays out a death benefit to your beneficiaries upon your passing.

  • You pay a monthly, quarterly, or annual amount (known as a premium) that keeps the policy active.

  • A beneficiary is someone you choose to be the recipient of the funds if you were to pass away. This could be a spouse, child, parent, grandparent, aunt/uncle, cousin, or friend (I'm sure there are more options).

  • Because we are talking about Term Life Insurance, the coverage period will be a predetermined amount of time stated in the policy. This could be 10 years, 20 years, or until the age of 72.

  • Term Life Insurance does not stay active forever - you can (and hopefully do) outlive the policy.

  • This is purely a safeguard against the worst thing happening - you prematurely pass away.

 

So if Term Life Insurance doesn't last forever, why would I ever get it?

  • Good question. Before I answer, please understand that I do not sell life insurance and will make no commissions if you were to buy it. This is purely my perspective on the subject and something I currently do.

  • Most people do not have enough money saved for a proper funeral. These costs can be upwards of $10,000 - $15,000 (or more) and can be financially damaging to loved ones. Don't let that happen.

  • In this current economic condition, families are dependent on two incomes. If you one of you were to pass away, there may be hard financial decisions to be made.

    • What if you cannot afford your house/apartment payment without your spouse? You may need to move or sell in order to afford where you live.

    • If you have children, can you afford daycare or school without the other person's income?

    • What if all your money now needs to go to funding your everyday life and you cannot save for retirement?

    • These may be drastic examples, but it is important to take these all into account and do your best to protect your assets in case of the worst.

  • Term Life Insurance can be used as a placeholder for Permanent Life Insurance.

    • Remember when we talked about your health impacting premiums? The earlier the cheaper.

    • Term Life Insurance can be converted into Permanent Life Insurance without the need for another health inspection (consult me or an advisor for more details). I will go over Permanent Life Insurance shortly.

 

How much should I get:

  • This is very open-ended and is not a direct science.

  • Get the amount that you can afford. Something is better than nothing.

  • If affordable:

    • At a minimum, get an amount that will cover funeral expenses - expect this cost to be (at a minimum) $10,000 - $15,000.

    • Next, calculate all your outstanding expenses and assets and get an amount that will cover this.

    • Next, include 5-10 years of replacement income to help normalize your family's total income. Essentially, include an amount that will replace your income for 5 to 10 years.

    • Finally, include all future financial goals that you would like to pay for -> college fund, retirement account, etc.

 

Create a budget

  • Yes, this is a recurring theme here.

  • A budget will inform you on how much you can spend on Term Life Insurance. It must be a comfortable number that is within your. means.

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