I’d Rather Die than Talk about Life Insurance
Yeah, we get it. Life insurance seems so uninteresting.
When you’re young and healthy it’s not something you would think about. But if you have anyone who depends on your for their support, you need to think about life insurance because it can provide the cash they’ll need in case you don’t live forever.
It’s boring, so we’ll be brief. Here are three things you need to know about life insurane:
- Who needs life insurance?
Not everyone needs life insurance. For example, if you don’t have anyone relying on you for financial support, skip it. After all, life insurance isn’t for you – it’s for those we leave behind. But, if there are people who do depend on you for their financial support, then you need life insurance. It will provide a cash payout to whomever you designate in the event of your death. While you can never be replaced, several years’ worth of your income can be. It’s a very inexpensive way to create an instant estate.
- There are two ways to determine how much life insurance you need:
Income replacement method: Determine how many years’ worth of income you would need to replace. If you are 40 years old, you may be able to buy insurance that would pay 15 or 20 times your yearly income. That would take care of your loved ones for a good long time.
Needs-based method: Consider the impact of your death on those who depend on you. Would your spouse or partner or children have to start working if they are not already working? Is there a mortgage to cover? Are there kids to send to college? Add it up and determine how much would be needed if you weren’t there.
- Determine which type of insurance you need, term or cash-value.
Term life insurance is the simplest life insurance to buy. You select the payout amount, and the period of time you want the coverage (10 years, 20 years, 30 years). Many financial planners recommend buying term insurance and investing the difference between a term-insurance premium and a cash-value premium.
Cash-value life insurance (also called permanent insurance) can be a good option, but it’s not always easy to understand. It grows in value during the policyholder’s lifetime and pays out upon the policyholder’s death. The monthly premiums are higher than term life insurance, but the payout is expected to be higher, too. And – you don’t actually have to be dead to access the money. For example, you could use the policy as a tax-sheltered investment (meaning the interest earned and increasing value on the policy are not taxable), or if needed, you could loan yourself some money from it, even while very much alive.
So, yeah, boring stuff, right? But know you know:
- If you need it or not
- Two ways to determine how much protection to buy, if you need it
- Two options (term or permanent) for buying it, if you need it
If you consider yourself a candidate for life insurance, and haven’t died from boredom yet, I invite you to talk through options and possibilities with me. I’ll do my best not to be boring. But even if I am boring, sometimes you just have to power through if you want to create a safety net for those who depend on you.
George Page, Jr
Page Insurance, Ltd.
102 Boston Street
Guilford, CT 06437