Some Personal Financial Challenges Are Actually Easy to Overcome
Most people can afford – and should have – lots of term life insurance
If you’ve put saving for retirement, or your kids’ college educations, at the top of your personal finance to-do list, that’s admirable. But you may be so stuck on those very challenging goals that you’re ignoring some easy stuff you could cross off your list.
Like life insurance. It’s a financial need that is often mistaken for difficult-to-execute, when in fact it is easy to grasp, straightforward to buy, and incredibly affordable.
The problem is that much of what you know – or what many insurance agents will tell you – makes it confusing and more expensive than it needs to be.
Coming to term
With very few exceptions (more on that in a sec), the only policy you need is called term life insurance. As its name implies, it covers you for a set term: five-years, 20-years, shorter or longer.
Insurance is necessary when people are dependent on your income. Exhibit A: Young kids today are a huge money suck, but 20 years from now, chances are that you will have raised them into self-sufficient adults. (Fingers crossed!) So, if you have young kids, you for sure need life insurance to provide for them if you were to die before they reached adulthood, if you don’t have other assets your family can fall back on.
Same goes for a spouse. When you’re young and have yet to amass savings, one of you dying prematurely could leave the survivor in a financial lurch. Or parents you help support. That’s not a financial responsibility that will last forever.
It is the rare situation for which more expensive “permanent” insurance policies are necessary: a special needs child, or if your estate exceeds the current federal estate tax limit, $11.4 million, and your heirs will have a hard time covering the bill (a nice problem to have).
Your employer policy isn’t enough
Many employers offer a life insurance benefit. Nice bennie, but not nearly enough. Typically, policies offered through work pay one year’s salary – maybe two – to your survivor.
For young families that have recently bought a home, term life insurance is how you make sure the family can keep making mortgage payments (and property tax and maintenance) for the next 20, 25 or 30 years even if a breadwinner dies prematurely.
Cheaper than you think
A 30-year-old buys a term life policy that will pay $250,000 to the beneficiary if the insured dies before age 50. The annual premium to keep that policy running for the full 20 years?
A. $1,000 or more
Correct answer: C; 80% of respondents in a recent survey overestimated the cost.
Not a millennial? A 45-year-old male in good shape (not fantastic iron-man shape, just good shape) who wants $1 million of coverage for 20 years might have an annual premium of around $1,800. Not nothing. But talk about value: $150 a month to give yourself 1 million reasons to sleep easier for the next 20 years.
Skip the face-to-face with the agent
Four in 10 people in the same survey said they know they need to buy life insurance or more coverage, but haven’t. Dealing with an insurance agent putting you off?
Term life insurance can be bought online. You still get to talk to a human (if you want) to answers questions. Online term insurance sites such as Quotacy, PolicyGenius and AccuQuote will shop your application around to various insurance companies, providing comparison shopping, and then usher you getting the policy up and running.
Depending on your age and the size of the death benefit, you may need to have a quick medical screening. Hold your groaning. The way it works these days is that the insurance company will send a med tech to your home (or office) to take your vitals and probably a blood sample. That doesn’t scream inconvenient.
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