September is Life Insurance Awareness Month – so, naturally, let’s talk about life insurance. Most people that I speak to either don’t think about purchasing life insurance or do not have enough of it. And a lot of people feel that it’s not something they need to worry about now, that they will get to it later in life. But the most impacting reason I have found is that people say that they can not afford it right now. The truth of the matter is that when you’re younger, life insurance is much more inexpensive. There are also different kinds of life insurance, some options more cost-effective than others.
There are a lot of choices available for life insurance coverage. Examples of different types of life insurance are term life insurance – where the rate expires after a certain period of time-, whole life insurance, or permanent term policies – where your rate is locked in for your whole life. There is a coverage called universal life insurance. This is coverage that builds a lot of value and which you can use as a retirement tool later on in life. It is important to remember that the younger you are when you get your life insurance policy (because you’re young and healthy), the cheaper it will be because it allows you to lock a rate in for your whole life, you will never pay more than that. This is the most effective way to make sure that you can afford life insurance.
The biggest problem I see is that people just don’t think about it when they’re young. Let’s take an example – say you’re 40, have two kids and a mortgage and you take a few medications. Sometimes the medications taken are going to increase the rate. Sometimes certain factors can even exclude you from life insurance, which is terrible because if you had gotten it younger you would have been eligible. This is why it’s really important, to talk with someone about life insurance and get something in place to protect your family. Even if you don’t have a family yet, which is a common argument I get from a lot of young people. But did you know that a young person can get a $25,000 policy for as little as 10 bucks? And that could be a permanent policy and you just pay your 10 bucks, and the value will always be $25,000. Hopefully, inflation will not eat away at that too much if you don’t die for 60 years, but it’s going to help pay for your final expenses.
As a young person, don’t fall for the trap of the ‘go fund me pages. It actually drives me a little crazy because I feel that if people had just planned a little bit, they wouldn’t be putting this burden on their families. I think it’s super important to sit down and figure out what you can afford for life insurance and how your needs will change over time. So even if you get a small policy now, that you have determined, you’re going to keep this policy as a final expense policy. Then later on, when you get married or have kids, or have a mortgage, you can add additional policies to cover those things. Sometimes we don’t need that full life insurance, for your whole life. You want to make sure your final expenses are taken care of. And if your debts are paid off, when you retire and you own everything, you don’t need a ton of life insurance, unless you’re just trying to leave some money for family members. And that’s another conversation for another day.
I make use of a great tool, a life insurance calculator tool that even if you have life insurance, now, I am able to evaluate your coverage and make sure you have enough. What I find is people don’t have enough because, you know, they think they have enough because the policy has a high number, such as a million-dollar policy. And this happened not too long ago, where I had a client whose spouse had died.
She has two small children and is a stay-at-home mom. Her husband had a million-dollar life insurance policy and they were in their late thirties. So she thinks, “I’m a millionaire now”. She wasn’t happy her husband died, but she thought she was set and that she didn’t have to worry about anything. She had planned to go and buy that nice house on the lake for herself and the kids.
I had to sit down and talk to her and explain to her that this money needs to last. Are you planning on getting a job? Are you planning on staying at home with your kids when they’re little? If so, then we need to probably invest some of this money because you’re going to actually have to learn to live on less than what you currently do, and she was so confused because she was getting a million dollars. But when you break it down, her husband made about $85,000 a year – so we need to ensure you make your money last to cover a number of years worth of income.
The life insurance calculator is a great tool. Send me an email if you’d like my help with calculating your needs. I’m happy to schedule a time with you. If you don’t have a life insurance policy and need to discuss your options, I can get you some quotes and then take it from there. Remember is it life insurance awareness month – do not leave life insurance until it is too late.