September is National Life Insurance Awareness Month. Yes, I know what you are thinking, there is a month dedicated to everything from “National Frozen Food Month” – (March) to National Novel Writing Month (November) …. But there is a big difference between packs of petrified peas and preparing for the future of your family.
So this is my “PUSH” for life insurance. Because out of all the insurance policies you will own in your lifetime, none is as important as life insurance for your family.
Honestly, no one wants to talk about or read about, life insurance. It is not a subject most people desire to discuss and generally people put if off as long as possible. But you would not believe how many people are woefully under-insured when it comes to their life insurance policies. Often, people assume that the polices they receive as compensation packages from the companies they work for are sufficient. Often they are not. Certainly with the rising cost of clothing, taxes, tuition, food and inflation, what sounds like a large sum, will seem less so over the years.
- · 4 out of 10 people do not have Life Insurance.
- · 38% of people ages 35 - 54, and 27% aged 55 + do not possess a Life Insurance policy.
Life Insurance is a simple concept; you purchase a policy that pays your beneficiary or beneficiaries when you die. But the decisions of what kind of life insurance to purchase, how much of a death benefit and how much you pay are extremely complex.
What Kind of Life Insurance: Whole Life Vs Term?
Term Insurance - provides protection for a specific period of time and generally pays a benefit only if you die during the “term.” Term periods typically range from one year to 30 years, with 20 years being the most common term. One of the biggest advantages of term insurance is its lower initial cost in comparison to permanent insurance. With term insurance, you’re generally just paying for the death benefit, the lump sum payment your beneficiaries will receive if you die during the term of the policy. Term insurance is often a good choice for people who are planning on establishing a family, especially if they’re budgeting. It allows them to buy extensive coverage when they truly need extensive protection. Term insurance is also a good option for covering needs that will not exist over time, such as college tuition, children leaving the nest, weddings, etc.
Whole or Permanent Insurance - With most permanent policies, your premiums help fund the death benefit and can accumulate cash value. Permanent insurance offers lifelong protection, and you can accumulate cash value and defer your tax payment. This cash account can be used for a variety of purposes, from helping you out financially during the tough times, to providing funds for future unplanned opportunities, to taking care of you during your “golden years”. The reason that many people do not opt for “Whole” life insurance is that the Initial premiums are significantly higher than what you would pay for a term policy with the same face amount.
Who Do I Purchase From?
There are more than 2,000 companies selling life insurance in this country. Some are very good, financially sold companies. others are not so sound. A company's financial strength is vitally important to you because, hopefully, no one is going to collect on your life insurance for a long time.
Most importantly, you want to make sure that your life insurer will be around for the long haul, how do you do this? You can consult a seasoned insurance professional, which is probably your best bet, or you can look at how various independent organizations "rate" the life insurers you are considering. Ratings are like school grades, A+, A, A-, B+, etc. In general, it's wise to stick with companies that are rated A or better by most rating organizations.
How Much Do I Really Need?
Many people state that they cannot "afford" to purchase a Life Insurance policy. If you cannot afford $50 per month now, how can your family afford anything after you are not here to provide for them. Life Insurance is the last paycheck you will give to your family.
Life Insurance is far more than just a decision of how much to buy. Depending on your financial situation, Life Insurance can be used for a variety of purposes, in addition for providing for funeral expenses, such as:
• estate planning
• accumulating cash
• transferring wealth
• achieving estate tax liquidity.
As well as, income replacement, mortgage elimination, college tuition and retirement.
Life Insurance is like Auto Insurance in that you can buy a lot of it or not very much of it. Life Insurance "differs" from auto insurance in that, depending on the type of policy you buy, you can pay a lot or a little for basically the same benefit.
A simple calculation on Life Insurance Amount Needed is:
*Current and Future Financial Obligations (Minus) spouse’s earnings, savings, investments and life insurance you already own (equals) = LIFE INSURANCE NEED
*The non-profit organization Life Happens provides a calculator to help determine the amount: http://www.lifehappens.org/insurance-overview/life-insurance/calculate-your-needs
Keep in mind, that these tools are not a substitute for a seasoned insurance professional. He has the experience and resources to simply sit down with you and develop the custom plan that is perfect for your situation. Also remember, that the younger and healthier you are, the less you will pay for coverage. Life Insurers like to have their policyholders around for a long, long time.
It Is Simply, All About Your Family:
That is what Life Insurance is all about, simply taking care of your family. You provide for their needs now ... food, housing, clothing, school, and the simple joys of going to the movies, ballgames, vacation. It is important to make sure that the basics are covered, no matter what may happen.
And in these tenuous times, the most critical and crucial thing that you can do, is protect your family and prepare for their future.