There are a lot of people who ask me about life insurance. Most of the time the questions are "how do I get it?" and "Do I really need life insurance?" More times than not it is the first question that is asked. Most people know that they need life insurance but aren't sure how to go about getting it or what kind of life insurance they need. There are all types of life insurance. Many people see the ads on tv (usually about final expenses or no medical exams required, etc.) So, there can be a lot of confusion when it finally comes time to seek out life insurance because of the enormity of options. So, in this blog, I kind of want to help you understand your need for life insurance and what kind of insurance you really need.
"What is life insurance and why do I need it?"
Life insurance in its basic terms is insurance on the life of someone. Whether it be a child, grandchild, "bread-winner", or spouse there is insurance to protect or provide for those who are left behind in the wake of a tragedy. Life insurance usually only pays out if the person who is insured either passes away or is diagnosed with a terminal illness. I know having to think about someone not being there is hard, but what is even harder is not being able to continue financially if they weren't there and you had no life insurance in place. Life insurance is there to make sure that the only thing that you have to think about once someone passes is the joy and memories you had and not how am I going to pay the mortgage, or college for the kids or funeral costs. Life insurance is important and a necessary item, but most of the time we know we need it we just don't want to jump into the weeds to figure out what we need. This is where I come in. I am here to help you figure out what your life insurance needs are and to think about those tough questions of "what if..." or "how will I/we ...." by helping you come up with a game plan to answer those questions.
"What kinds of Life insurance is out there?"
There are so many kinds of life insurance out there that it can be confusing on what you really need. If I were in this for sales only, I would tell you that you need it all and to buy it all, but thankfully that is not why I do what I do. I am here to help you make the most of your resources and to make sure that if something tragically happened that you had that covered financially. When I am speaking with individuals about life insurance, I first want to find out what they think they really need life insurance for. It may seem like a weird question, but I am trying to find out what their concept of life insurance is so that I can help educate them and give them understanding to what the purpose of life insurance is. There are really two types of life insurance that I work with: Term and Permanent. Term is exactly how it sounds. You purchase life insurance for a set term period and a set death benefit, and the cost of the policy stays the same through that set term period. This is usually the type of insurance that is best bought when younger and there are a lot of outstanding bills (i.e. mortgage, college expense, annual salaries). It is usually called the "working years" life insurance because you can purchase a lot of coverage for not a lot of money. When I first started out there were only really 3 term periods that was universal with all life companies: 10-, 20-, and 30-year term. Now there are several companies that even do 40-year terms. The fact is that the younger you are the more term length you need. If you do the math with me, if you take out a 40-year term at age 25 that gives you coverage until age 65. Then what, you hope you don't waste all that money to get to age 65 and then have nothing. Unfortunately, some people get caught in that trap in that they have nothing else but term life insurance and haven't done anything to prepare for life after the term period is over. Most term life insurance is designed to give you protection during the term period and when that period is up then the premiums become very expensive in which now you can't continue to pay. So, it is important to make sure that you have some term life insurance but not put every egg in one basket. This leads me to the other type of life insurance, permanent. Permanent life insurance is usually more expensive because it builds cash value over time. The most prominent type of permanent life insurance is called "Whole life" (final expense, burial, etc.) This is usually purchased in a lot smaller increments than term because the coverage is over the life of the individual. For instance, if you take out a whole life policy when you are young, it provides you coverage throughout your entire life if you pay the premiums. The premiums stay the same which is why it is a little more expensive because as we get older the cost of life insurance increases and to compensate the whole life policy is more at the beginning so that it doesn't have to increase as you get older. So, what kind of life insurance do you need? Both to some extent. If you aren't sure how to go about that, that is what I am here for. Let me help you make sure that you have a gameplan.