Ugh! Life Insurance…You probably don’t feel like sitting down with a life insurance agent and mulling over the ridiculously tedious and depressing concept of providing for your loved ones when you kick the bucket. Unfortunately, this is one of the most crucial aspects of investing. So, let’s try to make it light and easy to understand.
Life insurance requires that you pay a lump sum or more likely, periodic payments to an insurance company in exchange for them paying your beneficiaries a lump sum upon your death. This is especially important for families where one or both incomes are needed to meet the expenses of the family. What would happen if your husband died? Would you have enough money to pay the mortgage, care for you kids, buy cute boots? If the answer is, “No”, then you need to have insurance on your husband’s life. That way, if he dies, you receive a check. It’s not going to make the loss any easier, but it won’t put an additional burden on you in a time that’s tough enough on its own.
There are many types of insurance, but the two basic ones that we will focus on now are Term Insurance and Whole Life Insurance. Like the names suggest, Term Insurance is only good for a predetermined number of years (10, 20, 30 for example) and Whole Insurance will cover you for your whole life (no matter how long you live, your beneficiaries will receive the stated amount when you die).
Many times, especially for young women with children, term insurance will suffice. It is less expensive and can cover you until the house is paid off, the kids are finished with college, etc. You might be bummed to learn that you can no longer afford those cute boots though; that’s why there is Whole Life. Cute boots probably aren’t reason alone to buy life insurance, but if you are concerned that your lifestyle will be negatively affected financially regardless of when your spouse dies (aside from the obvious sadness), then you may want to consider Whole Life – then even if hubby sticks around until he’s 96, you will still get the life insurance proceeds. Maybe you are substantially younger than your spouse; having the proceeds from insurance would allow you to cover expenses for what we hope is a very long life.
If you are a healthy adult who doesn’t smoke a pack a day, you may be surprised how inexpensive your insurance policy could be. If you are meeting with a financial advisor to discuss this, bring with you a list of all of your expenses and the details of how long those expenses will exist. Some things, like utilities, car payments, car insurance, health insurance won’t ever go away. Other things like mortgage payments, credit card bills, and tuition payments will typically evaporate over time. Also, have an idea of how much each spouse makes and how much they anticipate in pensions and social security so that you can discuss the likeliness of needing additional money that can be turned into income
The goal is to be covered by insurance just in case something happens. Luckily, a glass of red wine is supposedly equal to an hour in the gym, so hopefully the insurance will only be a safety net in case that turns out to be nonsense. We’re still banking on it though.
We are independent life insurance agents which means we have access to countless insurance providers which allows us to get our clients the best prices. Once we determine together with you how much insurance is suitable and for how long, we’ll shop around for you. This gives you the peace of mind you aren’t being sold a life insurance policy by a sales rep for a particular company regardless of if the product is best for you. For more about our professional background and how we can help, click here. We also encourage your questions and comments!
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice