Most folks ask this question from time to time. But the answer is trickier than you think. Often a conversation about whether you need life insurance gets started because a life insurance salesperson contacts to tell you why you NEED life insurance. It’s not always the best conversation to help you carefully evaluate your options.
Regular readers of this space know that I’m a fiduciary financial planner. I ALWAYS act in my clients’ best interest. I often talk about life insurance, but ONLY from the perspective of what risks does your family face? And would life insurance help you manage those risks effectively?
So maybe I can help you figure this out.
Why Get Life Insurance?
- Who would be in a jam if you died tomorrow?
- Do you have a spouse or partner who is counting on your income to help pay for a home?
- Do you have kids or family members who are counting on your help paying for college?
- How hard would it be for them to find a way forward if you were gone?
- Are you the primary earner for your family?
- Have you made commitments that feel obligated to keep?
- Does your family currently owe a lot of money for mortgages or car loans?
Do I Need Permanent Insurance or Temporary (Term) Insurance?
It depends on your specific situation. Many families have a mix of both types of insurance. Each chassis is different:
- Term is Cheaper. This is because term insurance pays a death benefit if you die within a specific period of time, 10 years, 20 years, 30 years, so not EVERYBODY who pays their premiums will receive a payout.
- Permanent Insurance is Permanent. This means that you can be certain, that as long as the premiums are paid, there will be a death benefit when you die, no matter when that may be. But since the policy is designed to pay a benefit all the time, the premiums are high enough to cover death benefit.
Can I Afford Life Insurance?
You can probably afford some life insurance. For a few reasons:
- Many large companies offer some life insurance as an employee benefit, often at low or no cost to the employee.
- If you are young and healthy, the premiums will likely be very low.
- On average, a 30-year-old male can get a $500,000, 20-year term life policy for around $222 a year.
- Even if he waits until turning 50, the average policy is only $821 a year.
- Costs are even lower for women.
- You might even qualify for life insurance if you have an existing medical condition. It pays to check it out.
If it sounds like choosing life insurance could be confusing, you are right. I think you would benefit from a visit with an experienced, highly-trained, CERTIFIED FINANCIAL PLANNER™ professional and Behavioral Financial Advisor to help better understand your options. I love to meet new people. So, follow this LINK to find a time for us to have a get-acquainted visit.
I am a financial planner who is an advocate for my clients ALL THE TIME – a fiduciary financial planner. I provide guidance based on clients’ best interests, not commissions or sales quotas. I think it’s the best way to serve clients and I am thrilled to work this way all the time.
And yes, I’m still taking on a few great families to be part of my financial planning practice.
Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.