Tuesday, August 11, 2015
Did I lose you already????
Most folks don't like to think about life insurance and I understand. I first got in the business in 1994 and have heard many reasons for not having it or wanting it.... until someone has to pay for the funeral. THEN, it's a different story!
What is the amount of life insurance YOU have right this moment? Do you know? What will happen to your family if something awful happens to you today? How much would your grieving family suffer in your absence? These are all questions you should be asking yourself, in preparation of the worst.
I'll admit, I haven't talked to many friends or family members about it. I'm probably not being a responsible or a good friend/relative, so I decided to write about it here, in the hopes that it may clear up some confusion folks might have.
The most general question comes often – “Why should I buy any insurance when I have some at work?”
This is a common argument for not spending the money. Most folks don't have enough coverage at work since there is a limit most times. Usually, it is a multiple of your annual salary, and to take care of loved ones, you need MANY multiples of one year's income.
Also, how many of you plan on passing away while you are working? Most benefit programs don't follow you into retirement, so at the time you may be thinking about buying insurance to replace the discontinued coverage, you find out the price has made it unaffordable. You may not even qualify due to health reasons. Yes there are policies promoted on the TV for coverage that asks no health questions. You can't get away from their commercials no matter what channel you are on! These are the smaller ($25,000 or less), final-expense-only type of policies that are much more expensive than standard rates.
Obviously, being born in to a family that is long-lived offers the best odds to being around a good long while, but there are no guarantees of course. I'm sure we all could come up with examples of parents outliving their kids.
While family history is used by many companies, it is not the only measuring process in calculating rates. Current age, build, health, and smoker status are the major areas used to determine the risk involved for insuring your life.
As you age, the cost of insurance goes up every year. Logically, you are nearer to the day you will pass away, even if from natural causes. If you are under or over weight, these present health problems for some people too. If you smoke, there is a mountain of evidence that shows the cost of healthcare is more and lifespans are generally shorter.
Why compound an unexpected passing with the further complication of an unexpected financial crisis?
“Why do I NEED insurance anyway?”
Some people may not need ANY life insurance at all. They may have a significant amount of money in the bank and won't have a problem writing a check for the $10-$15,000 needed to be paid in advance.
To the OTHER 99% of you, there is a need to at least look at your situation and make sure you have all the protection required.. How do you know? You have to snap your fingers and become the walking dead for a few minutes.
Typically, a young family needs the most insurance. The younger the children, the more funds it would take to provide the things they would need as they grow up. Beyond food, clothing, and shelter, there are many many requirements kids have these days. You know.....
If you want to make sure they can go to college, insurance is a way to make sure, no matter what, they will get there if you are gone too soon.
If your spouse works, how will your role be filled once you are not there to help? Would family be expected to step in? Is that realistic? With only one income, would they be able to afford all the things your remaining family need?
Is your mortgage, plus all other debt, affordable for your significant other without your check deposited regularly? If you paid it off with insurance, how much of a burden remains for your family? Are they able to succeed in staying in your home after you are gone?
Do you want your last memory of you to be that of someone who didn't care enough for their family to solve this problem for them while you could?
Fortunately, we don't know when our time is up. It comes as a surprise to most of us. That is why it's difficult to plan for. Any good plan would cover the worst case scenario, because for some, that is what their family will be left with.
If you don't have a family, or the kids are grown, you have different needs altogether.
You may want to leave a charitable contribution to your favorite organization, you may have a tax problem for those that stand to inherit your things, or you may just want to make it easy to say goodbye to your friends you leave behind. There are many situations to think about, which is one of the reasons agents are valuable to you. They can give you the peace of mind, knowing you have taken care of the things important to you. Finding one you can trust may be a little challenging, but they are priceless for your families at their time of need.
“Should I buy term or permanent insurance?”
Term insurance is the cheapest coverage you can get. It is the rate most often quoted on the TV, as it is designed to be inexpensive. That doesn't mean it's the best choice however.
If you have a specific debt you want to pay off in the event of your passing, term fits perfectly. It has a low rate, it covers when you need it, and it ends at a specific time. Most policies are like car insurance. They do not give you any money back if you don't use the coverage. There ARE a few policies that ARE promoting a “return of premium”, but it is at an extra cost and usually has limited coverage amounts. They could be the answer if you have a major problem of feeling like you get NOTHING for the coverage you had but did not collect.
Permanent policies are named many things. Universal, variable, or whole life are all supposed to be “lifetime” coverage. They will ultimately pay the death benefit when you pass, and the payments are much more than term policies in advanced ages. If you have a need for final expenses, permanent is usually the way to ensure your family can sleep soundly, knowing they have a backup plan if you are no longer around.
This is NOT written to be an all-encompassing course on insurance. Your situation is unique to you and usually cannot be fully complete with a $100,000 policy through the mail. Using common sense and a plan of action in the worst of scenarios will go a long way to preparing your family to deal with your absence AND the burden of the loss of your income.
If you are clueless as to what your needs are, you might ask your accountant (if you use one for your taxes), ask your best friends what THEY did, ask your parents (you should KNOW already if they are up in years), and ask yourself the most important questions of all – if I am gone, what will my loved ones do to move on?