The Top Reasons You Need Life Insurance

17 Responses to The Top Reasons You Need Life Insurance

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14. 

    Valeny on February 10, 2012 at 3:35 am

    We’re all concerned about the future – the great unknown that holds the promise of dreams fulfilled and struggles overcome. But your family’s financial future shouldn’t be an intangible – it should be something thought out and planned for so that everything you’ve spent your life building can be preserved. Life insurance can help with that.

    What Do I Need Life Insurance For?

    Yet another policy or contract to think about, life insurance can seem like yet another expense eating away at precious income. Often the last thing people want to consider when they’re dealing with their already stretched budgets is purchasing life insurance.

    But life insurance is a way to protect and provide for your family. Maybe you want to ensure that your partner or spouse isn’t saddled with mortgage payments. Maybe you want to be able to offer your children the chance to get a solid education. Maybe your children are older and you want them to be able to carry on your business. Or maybe you want the opportunity to reap the benefits of a life of hard work before you’re too old to enjoy them.

    Whatever your reasons, you can educate yourself about the types of policies out there, and then you should work with an agent to structure the best plan for you.

    Types of Life Insurance

    When we talk about life insurance, there are generally three types of policies to look for and different considerations with each one.

    Universal Life Insurance: A flexible policy that you can structure around your needs and your monthly income. You can adjust the premiums paid per month if your income varies over time. You just have to ensure that you pay enough to keep the policy valid and in effect. There may be a death benefit option that can either increase or reduce the death benefit as needed. This is especially useful if you have young children and want certain levels for lengthy periods of time, but then want to be able to reduce the benefit when your children are grown.
    Term Life Insurance: This kind of policy will maintain a certain premium for a distinct time period, after which you can opt to continue coverage with a premium that increases annually. You might decide that you want life insurance for 15 years with guarantees that your premiums will remain fixed. If you have a fixed budget, this might be especially useful.
    Whole Life Insurance: This offers a guarantee on the death benefit and guaranteed cash value for a guaranteed premium. This is often most expensive kind of life insurance, but may pay dividends (refunds of unneeded premium) that can be used in a variety of ways.

    Any Other Considerations?

    Yes! There are certainly many things to consider when thinking about life insurance. You need to determine how much you can afford to pay on a monthly basis. Rather than thinking of that money as being additional income that must be earned, it’s less burdensome to think about where you might stretch your budget and save a few dollars each month. It’s easier than you think. Cutting down on a latte here, a dinner out there and a couple of pay-per-view movies can add up to significant savings.

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15. 

    Adam on February 13, 2012 at 8:34 pm

    All debt is ugly but some debt is simply unavoidable (at least in the earlier part of your life). Let’s take your first house for arguments sake. 99% of us need to go hat in hand to the bank to arrange finance for our first home. The problem is that while we get to live in the house, the bank owns the property. Remember that next time you are enjoying a cold beer on your couch and one of those fluffy bank adverts jump up on your LCD.

    Die before paying your house off and guess what? The bank wants their outstanding money back. You didn’t honour your end of the agreement (paying back the money you owe). If your spouse doesn’t have the cash to settle the bond, the property is repo’ed. No husband, no house and a 9 month old kid. Sounds a lot like one of those reality TV shows (which could actually be called Dummies Who Die Without Life Cover)

    A simple life insurance policy can sort that potential mess out. Life insurance proceeds pay out to your spouse on your passing, she pays off the bank and has a bond free property (one less thing she needs to think about)

    Reply
16. retirebyforty on February 29, 2012 at 8:55 am

    If you want to retire early, you need to cut down on every expense you can to get the goal reached, right? Of course. But this begs the question of whether life insurance is worth the capital outlay when you’re already trying to sock away every extra penny for your future nest egg. The problem is compounded by different plans from different companies, and the whole process can become mighty confusing – and very discouraging – if you don’t even know if it’s worth buying. Evaluating your life insurance needs is easy; all you need to do is answer a few key questions to determine if it’s a necessary expense or one you can cut from your budget.

    Who’s Going Need You?

    If you’re looking to cut expenses any way you can, then cutting out a monthly life insurance bill may be one good way to help get your budget down to a shoestring. A good rule of thumb is to decide if anyone in your family will be negatively impacted financially if you died today. If your kids are out of the nest and they are self-sustaining, then that’s helpful. But if you still have a spouse that needs your income to make it each month, then you should consider keeping your life insurance plan for now.

    What Kind of Life Insurance Do You Need?

    The answer to this question really depends on why you need life insurance. If you want a plan because your spouse and/or dependents will not be able to make it each month without your income, then consider opting for a term life plan that only covers the time period until your significant other will be able to go it alone. For instance, you may want to keep your term plan until your spouse’s retirement kicks in.

    If you want a plan because you would like to have an asset to pass on when you die, then you may want to consider a whole life plan. Whole life insurance policies have suffered a terrible reputation in the financial world in recent years, but not all plans are evil. However, it would still be a good move to only consider plans from large, well-known insurance companies such as Aviva or Ageas life insurance.

    How Long Do You Need Your Plan?

    Make sure to evaluate the reasons you need your life insurance policy, and only take it out for the exact time period you anticipate needing it. This way, you eliminate the extra expense for something you don’t necessarily need to have. The name of the game is reducing expenses, after all, and making a smart decision about whether you need life insurance is a great way to do that.

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17. 

    Jeremy on February 29, 2012 at 7:35 pm

    Ask anyone if a single person without any dependents should get life insurance and you’ll almost certainly be told no. But like most financial decisions, it isn’t as black and white as that. Sure, if you’re just a single 30-something living alone without kids it would seem like buying term life insurance would be a huge waste. After all, who do you have that you can leave money to? You don’t have a spouse or children that depend on your income, so that isn’t an issue. This is all true, but there’s an interesting fact about life insurance that puts people who wait at a significant disadvantage.

    It all has to do with the cost of premiums and insurability. In the insurance industry, the older and less healthy you are, the more you pay for insurance. When you think about it, this is common sense. Say a 20-year old wants to buy a 30-year term policy. The insurance company knows that the policy will expire when this person is just 50 years old. Statistics show that the chances of this person dying over the course of this term is quite low. Compare that to a 45-year old looking to buy the same 30-year policy. Now, the insured person will be 75 years old before the policy expires. This person has a much greater chance of dying during the length of the policy so the insurance company charges a significantly higher premium since they are assuming greater risk.The same situation plays out in terms of your overall health. At 25 you might be in the best shape of your life and have no major medical conditions that have developed yet. So, an insurance company is likely to insure you since you don’t have any major health issues. Again, after another 10 or 20 years go by you may develop any number of health issues that could make you completely uninsurable. What if you waited a few years until you did get married or have kids only to find out that you now can’t give them the protection they need because you’ve developed a health condition that was completely out of your control?
    Looking at the Numbers

    So, what is the real difference in premium as a typical healthy person ages? I went ahead and ran some quotes for a number of insurers to see what we could come up with. For this I stuck with your standard 30-year level term $500,000 policy at the preferred non-smoking status. Here are the average numbers:

    25 year old 30 year term – $525/year or $15,750 total
    30 year old 30 year term – $550/year or $16,500 total
    40 year old 30 year term – $810/year or $24,300 total
    45 year old 30 year term – $1,420/year or $42,600 total

    As you can see, there isn’t much difference between age 25 and 30. But look what happens when you let ten years slip by and want to buy the policy when you’re 40. The premium is 47% higher, costing you nearly $8,000 more over the term. Just five more years go by and you’ve nearly doubled that premium costing you more than $18,000 extra. It’s obvious to see how purchasing your term life insurance as soon as it’s appropriate to can save you thousands.

    Ever wonder how much term life insurance would cost for you and your family? You can get a free quote.
    So, Should a Single Person Buy Life Insurance?

    Does this mean a single 30-year old guy should rush out and buy life insurance? Not exactly. You really have to look at your situation and lifestyle to see if is something you may end up needing in the future. For example, if you enjoy single life and never want to settle down with a spouse or have a family, there’s probably no need to buy insurance. But if you’re 30 and in a relationship and hope to finally settle down with someone and have a family in a few years you may want to start looking at your options. As you can see, just waiting 5 years to purchase insurance can make a big difference in how much you ultimately pay, so even if you’re covered for a few years while you aren’t married or have children it could still save thousands of dollars. Or, let’s not forget the worst-case scenario, where some health issue may come up in those few years while you wait and suddenly you can’t get insurance at all, or need to pay a premium so high it isn’t even affordable.

    Take a look at your situation and see if it makes sense. If you’re already in a serious relationship and marriage is on the horizon the sooner you pick up coverage, the less you’re going to pay. If you don’t have any prospects of getting married or starting a family, then sure, you may want to spend that money elsewhere. It really depends on you and there’s no right or wrong answer.

    Don’t let life insurance get in the way of your other financial goals when single. If you’re burdened with debt, have student loans, or otherwise need all the cash flow available while you’re single, keep that in mind. It isn’t worth saving money on insurance if it’s going to make it take longer to pay off high-interest debt.
    But What About Beneficiaries?

    If you aren’t married and don’t have kids, what’s the point? Who would you leave the money to? The great thing about life insurance is that you can usually change the beneficiary at any time. So, if you aren’t married yet and still decide to get a policy you can initially put anyone you want down as a beneficiary. Maybe it’s a brother or sister, your parents, another relative, or maybe even your favorite charity. Yes, that’s right, you can list a charity as your life insurance beneficiary. Even if the worst is to happen and you were to die before you do get married or have children you can be sure that your money is going to someone or a cause that you believe in. Then, all you have to do is update your beneficiary once you do decide to get married or have kids. It’s that simple.
    Weigh Your Options

    It still isn’t going to make sense for everyone, but you should at least take into consideration the increase in premium and total cost of a policy if you wait even a few years. Some situations may warrant the purchase of a policy before conventional wisdom says to, and in many cases the savings won’t be worth it if you’re not in a position to take advantage of it. That being said, insurance is a key component of any financial plan so it requires some serious consideration. Keep in mind that the example we used here was just a simple $500,000 policy with someone in excellent health. Once you start talking about higher coverage limits and health issues the cost difference could be very substantial by waiting just a few years and the savings could literally be in the tens of thousands.

    So, if you’re someone who is thinking about the future and has marriage and/or children in the near future, you may want to run some quotes and see what kind of savings could be had by buying a policy early. You may find there’s little or no savings at all, or you could be faced with a decision that could save you thousands of dollars. Either way, it’s always a good idea to take a proactive approach and think about these issues before they happen.

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