Why You Need Life Insurance
My goal here is to get you to start thinking about ensuring you and your loved ones have some form of life in insurance, preferably a term life insurance policy, if possible. Or, if you already have life insurance, to revisit the coverage that you have. I'm not a life insurance expert, but I do know the importance of having good life insurance, and the devastating possibilities of not having life insurance.
We have all seen the unfortunate gofundme accounts to help families that have no coverage. As sad and unavoidable as that situation is for some people, it's important that we take steps now to ensure we don't put ourselves in that situation.
Whole Life or Term?
First, any life insurance is better than no life insurance. Most whole life insurance policies cover you for entire life, and the premiums you pay are typically applied to the death benefit and some sort of savings or investment, but most people don't need insurance for their entire lifetime because the purpose is to cover your income in case you perish. When you are no longer supporting kids and loved ones, it's no longer necessary.
The goal is for you to ultimately be wealthy enough to be self-insured. The point is that If you have $750,000 invested, you don't need a life insurance policy. Whole life insurance is also incredibly expensive and you will be paying a much higher premium (like an 8 or 9 times higher monthly premium). Also, whole life insurance should not be a place to store or grow your money.
In my opinion, insurance is designed to be replacement income, not an investment tool. You can get much better returns on your investment outside of whole life insurance. Without diving into a lot of technical terms, let's just say your rate of return is poor in a cash value whole life insurance policy.
Generally speaking, whole life policies are neither feasible, nor practical, for most people. Most industry leaders will tell you that you are going to come out light years ahead if you buy term life insurance and invest the difference between what you pay for term and what you would have paid on the whole life policy. It's not that a whole life policy is bad. It's simply less expensive for a whole lot more coverage if you go with a term policy.
Agents and brokers in the insurance industry will not always explain this to you because they make a much larger commission by selling you a whole life policy, as opposed to selling you a term life policy.
"Any life insurance is better than no life insurance"
Why Term life insurance? I could write a book about this, but let's keep it short and simple. First, as I mentioned above, it's much cheaper. I mean MUCH cheaper. You get a ton more coverage for the same premium payment. There is no built in gimmicks or tricks or complicated investments tied to a term life policy. It is what it is and you get what you are paying for. There is no investment component and so it's straightforward. You can vary the term from 10 years to 30 years, however long you feel like you need the coverage for your family.
If you don't currently have life insurance coverage, please stop reading this, and look up an insurance broker, and make a phone call right now. They will gladly give you quotes over the phone. Always use a broker because they can find you the best rates, they are not "captured agents", and the whole point of a broker is to shop around. I personally have a term life policy on myself and my wife that is a hefty enough amount to cover our income and replace it fully. In general, experts say you should have a term life insurance policy that covers 8 to 10 times of your yearly salary.
The choice is yours. Again, any policy is better than no policy at all, but if you take the time to get a policy, get one that is enough to cover your yearly salary many times over.
The good news is this:
A term life insurance policy is CHEAP, and it's getting cheaper an cheaper as Americans live longer.
Many people do not have enough coverage. Having a small $10K policy is not enough to cover your expenses and truly take care of your loved ones that depend on your income. Many of us need to take a look at the current policy we have in place, and increase the values of our coverage for proper amounts of protection.
The other thing that I think is important to mention is that you need to be careful when only relying on your life insurance policy at your job. Most of our current policies do not offer the amount we need because our situation has likely changed, and there may be stipulations, limitations, and small print that we may b unaware of, which can come back to haunt our family upon death.
If you are the breadwinner in your family, Life Insurance will replace your income in the event that something catastrophic happens to you. When you die, somebody has to pay the bills, so why not be sure you can pay for them for your family, when you are gone. That's called "security". Your family is worth it and the last thing they want to go through, if you were to die, is financial struggles. Leave them well taken care of. This information regarding the breadwinner, could also apply to a stay at home parent as well, because what you do, is valuable also. If something happens to you, your job now takes on a monetary value that can be expensive and hard to replace.
The foundation of good financial planning is a good solid term life insurance policy that provides proper coverage and proper protection for your family. Be sure to get a policy on you and your spouse, and when doing so, remember that everyone's role is important and noteworthy. As your kids grow and get older, and as you become more self-insured, you can reduce your coverage. However, term life insurance is so inexpensive for most of us that if you want to keep a small policy around, it's not going to break the bank to do so.
The bottom line is to get insurance, get the proper amount of coverage, and do it TODAY!