If you’re sitting on the fence about whether to invest in life insurance, you may want to ask yourself the poignant question posed by the LIFE Foundation: “If you died tomorrow, how would your loved ones fare financially? Would they have the money to pay for your funeral costs, medical bills, taxes and debts?”
Lillian B. Holt, LTCP, FSS, CLF, LILI, an Agency Field Executive at State Farm, adds that she has heard “I don’t need life insurance” repeatedly, particularly from single individuals without children. However, once they speak to an adviser, “They realize that they don’t want to place financial obligations on their family during a time of bereavement,” says Holt, who also points out that one’s health can change quickly. “We never know what the future holds, therefore it is important for us to plan for the unknown.”
Selecting a Plan
Everyone should participate in a Life Needs Analysis or a Financial Needs Analysis. I’ve seen too many people just decide they are going to purchase $100,000 worth of life insurance without discussing what their needs are presently and will be in the future. A whole life policy is one where the premium remains the same for the duration of the policy and has cash value. While initially the cost of a permanent policy is higher, in the long run it is a more economical buy than term insurance where the cost usually increases with the age of the insured. The Universal Life policy can be a great way to ensure your family is protected in the event of your death and, at the same time, earn dollars for retirement and/or your children’s college education. Another option is a whole life policy that is paid for in a predetermined number of years. As long as you do not use the cash value of the policy, you will not pay any additional premiums past the indicated number of years.
Your mortality rate—life expectancy—your present state of health, and your family’s medical history are key factors of cost. Other determinants include whether you smoke cigarettes, use tobacco, and your line of work. Usually younger individuals have fewer health problems, thus lower costs. We have to remind young adults that even if you don't have a mortgage at 25, there are often school loans, car notes and other final expenses to cover (in the event that you leave behind debt for others). ‘We buy life insurance with our health,’ is what we tell younger clients.
When clients really understand what their needs are they can find the dollars to pay the premium. Many families and singles start out with less insurance than they need, but by working with an insurance agent they can make the necessary adjustments to their policies. Some clients initially purchase term insurance with the plan of returning each year and converting the term insurance into a whole life plan. Don’t assume that you can’t afford life insurance or that you know how much you need. Make an appointment with a life insurance professional and have a meaningful conversation about taking care of those you love.