September is life insurance awareness month. Are you aware of your life insurance? This post will be a resource for the most common questions I have been asked over the last 11 years of as an agent who fully believes in the power of this product.
Life insurance is something you buy because you love somebody. It is bought so that in the untimely event of your death, you don’t leave loved ones in a financial prison. There will be no monetary burden left behind for them to worry about. They won’t have to sell cars, or lose the house, or move schools or set up a gofundme account. There will be no coffee jars at the convenience store, or extra collections at church. It is the last gift we can give someone.
So who needs life insurance? Chances are, you do.
Now that we have determined that you probably need some form of life insurance, I want to help you figure out how much. There is a simple formula I like use. How much life insurance do I need?
I can also break it down for you in less than 60 seconds.
There are many different life insurance policies out there but really only two kinds. There is term, and permanent life insurance. Essentially, term is your bet against the insurance company. You are placing a bet that you don’t want to lose. The bet is, that if you die, before the end of the term you decide on (usually 10,20, or 30 years) the insurance company loses and pays out a death benefit to your beneficiary. The insurance company wins this be 95% of the time.
Permanent insurance is a different animal that comes in many different variations. This is a policy you can own instead of “rent”. It can grow cash value inside, if managed and funded properly and can become a viable part of your financial plan.
Or if you want it boiled down in 60 seconds:
I have life insurance at work.
I applaud you and if your employer offers you a group plan, buy as much as you can. It’s cheap and is a great benefit. There are some shortcomings though. It’s not really yours. If you leave this job, you leave the insurance. What if you leave because you get ill? Then what? Most group plans can’t give you enough coverage. Do you think two years of your salary is really enough? If you do, please reread the first section of this blog. It may not be a full life insurance plan. Have you ever read your group plan? I have seen plans that will only pay out if you die as the result of an accident, or if you die on the job. So plan accordingly. Your group plan should be secondary. Listen here:
I do not qualify due to health reasons
There is a product available for those who haven’t previously qualified for life insurance in the past. There are some limitations on how much you can get. We offer between $5,000 and $20,000 worth of coverage and you only have to answer three questions on the application. 1. Are you on oxygen? 2. Are in an assisted living facility? 3. Have you been given 12 months or less to live. If you can answer no to those questions and are between the ages of 45-80, you qualify!
Should my kids have life insurance?
This subject seems a little odd, and it is one that people generally do not think about. If you do your research on this by googleling that question, you will find very polarizing views on this subject. I say, educate yourself on the pros and cons, and decide for yourself. Find out my thoughts here.
Can life insurance provide a tax free stream of income for me?
There is a specialized strategy that is out there which if used properly, can help people avoid paying taxes in their retirement years. I recommend a book called “The Power of Zero” that clearly defines this strategy. Click on this link for a free 8 page guide to this strategy. It is VERY powerful and is something worth learning. Taxes aren’t going down and any strategy you can find to hold on to your money, is worth exploring. Also, here is a podcast explaining the strategy in about 8 minutes.