With so many types of life insurance to choose from, how can you know which one is right?
This week, I’ll try to make that choice a little simpler.
The age-old battle: term or permanent?
I could devote thousands of words to this debate. (I won’t...you’d fall asleep — lol.)
Several famous financial advisers overly-simplify this decision.
For them, it’s always term insurance. I agree that term insurance can often be the best option and it’s certainly cheaper at the beginning.
But before deciding to buy that cheap term policy, there are several reasons to consider a permanent life insurance solution.
Let’s look at four pro-term insurance arguments, and then “the rest of the story”:
Number 1: “Buy term and invest the difference” is usually the biggest reason used to persuade people to choose term insurance. That sounds fine... if you invest the difference. But most people don’t invest the difference. Permanent insurance can be a form of disciplined savings for emergencies.
Number 2: “The rate of return on the investment is lower in permanent life insurance.”
Often true, but not always. There are many new types of permanent insurance plans that have market-competitive savings plans built into them.
Over time, especially 20 years or more, they can be extremely competitive. The unique tax-deferred growth within a permanent life insurance policy is one reason for this.
It can also offer less risk on the investment.
Number 3: “You only need life insurance during the years you have dependent children.”
If this argument were always true, then the case for “term insurance only” would be stronger. But it’s often not true.
There are many people who might wish (or need) to have life insurance that lasts their entire lives. A permanent life insurance policy will pay a death benefit even at 99 years old.
If you have a special-needs child who will need help for the rest of their life, a permanent policy might be a better choice.
This also can apply if a child of any age becomes injured in an accident and suddenly needs special lifetime care.
Number 4: “You can always get another term insurance policy after the first term runs out.”
This argument is made based on the fact that most term policies are “convertible” or “renewable” after the term. That’s true.
But if you are not healthy, the cost to continue your 20- or 30-year term policy is astronomical—almost prohibitive in many cases. And we all know that health can change in an instant.
Life insurance is a mystery to many people. And the mystery can cause mistakes.
My new series will focus on four big mistakes people make with life insurance. This week, let’s look at the first mistake: Not enough life insurance, or none at all.
How many people have life insurance?
Almost 60 percent of adults in America carry some form of life insurance. Much of that is employer-sponsored term insurance.
Many of the already insured say that they don’t have enough.
Among the “no life insurance” group, one in five say that they need life insurance.
In short, there are a lot of people who have no life insurance, and a large group of people who don’t have enough.
And I believe that’s a serious mistake. Here’s why:
Everyone should have life insurance.
Life insurance creates an instant legacy.
It’s truly an unselfish gift of love. You’ll never see the relief on the faces of loved ones who benefit from your careful planning.
But your generosity will live on for years in the lives of those close to your heart.
The legacy ought to replace a lifetime of earnings and also fulfill loving wishes for family that can extend for decades.
But most people don’t have enough life insurance to accomplish that.
Life insurance isn’t just for “mom and dad.”
Even if the kids are grown, you can leave a legacy for your grandchildren. A good start in life. Money to give them the freedom of educational choices.
Life insurance can also extend your generosity to many others long after you’re gone.
Do you have a charitable organization that you’ve given time and money to? Imagine your final breath meaning the continued life of an organization that serves your neighbor in need.
“I get life insurance through work. Isn’t that enough?”
Work-supplied life insurance usually falls into the “not enough” category.
It’s only good as long as you work at the same job. In addition, the amount of coverage is usually small, typically just a year or two’s salary.... hardly enough to replace a lifetime of earnings.
You can convert it to a personal policy after you quit, but usually at a much higher price.
“I’ll wait. I can always get it later.”
Putting it off, even for one day, can have a disastrous affect. Why?
Because only healthy people can get life insurance. And none of us are guaranteed good health tomorrow. It works like this:
“When you don’t need it, you can get it; when you do need it, you can’t.”
Paul (our fictional character of the week) was a young man who fell in love and was ready to get married.
He had never thought about life insurance before. He was single. Why would he?
But now, getting married, it sounded like a great idea! He’d get around to it... eventually. No rush. He was young, healthy, and going to live for years.
Paul and his wife had a child. And then another.
Life insurance? Sure. Some day. He had forever.
Until the day they found the lump.
Rare, they said. Chemo, they said. A fight to survive.
Suddenly, his procrastination took his choice away.
Life insurance became the gift he wanted to give his family if things went badly. And it became the gift he couldn’t buy at any cost.
If you are like many folks, you may not have enough life insurance.
Don’t be embarrassed. Call your trusted local agent and have an informal chat about it.
Make sure today, while you still have your health, that the dreams of tomorrow are protected.