While we all plan for the future, there is one area that is commonly overlooked: Preparing for the what-ifs in life…what if you were no longer around to provide for your family.
The simplest and quickest solution to plan for life’s unthinkable moment is to protect your family with a term life insurance policy.
You Everyone Needs Life Insurance
Let’s establish the simple fact ten out of ten people are going to die. The only real unknown is when it will happen, right?
While the best insurance policy is the one you never use, think of all the other insurance plans you already carry just in case something happens. You have health insurance, car insurance, and either homeowner’s or renter’s insurance to protect you from losing everything if and when an accident occurs.
Life insurance works the same way, but instead of protecting your “stuff” in life, it protects the most important part of life – your family.
Ask Yourself This One Question…
Ask yourself this question. If you were to die today, how would your family pay for life starting tomorrow?
Let’s say the unthinkable occurs and you don’t wake up tomorrow. After the funeral, the grieving process, and picking up the missing pieces of life, how financially stable is your family? Can they make the mortgage/rent payment? What about groceries, utilities, car payments, and all the other expenses life throws at us?
Now, let’s instead assume you had purchased a $500,000 term life policy before you unexpectedly passed away.
Life for your family now looks much different. As they start to pick up the missing pieces, your family receives a $500,000 tax-free check to help replace your income and still pay for life’s everyday expenses for years to come.
When is the Best Time to Buy Life Insurance?
Insurance companies don’t guess and instead refer to actuarial tables based on the probability of your untimely death. Yes, it does sound morbid but it’s also how life insurance companies are able to remain in business and have the funds available to pay your beneficiaries in the event you don’t wake up tomorrow.
They also assign rates for everything based on your level of risk. As we grow older, we have a higher probability of getting sick and even dying, therefore the monthly premiums you pay will also steadily increase. What is even scarier is life insurance companies don’t have to insure you if they believe you are too high of a risk.
Pay attention to what happened to Valerie.
She purchased a 30-year term life policy when she was 20 years old for $20 a month. Then, at age 23, she was diagnosed with a brain bleed, had emergency surgery, and made a full recovery.
However, if she had waited until after her bleed to apply for life insurance, she would have been declined coverage because her level of risk is much too high for the insurance companies to accept. She would be considered uninsurable if she were to apply for life insurance after the incident, but since she had it in place BEFORE she had the brain bleed, she is still insured.
Today, Valerie is a successful RN and also has three children that are covered with a $500,000 policy in case something happens to her.
What If My Employer Provides Life Insurance?
Since the average worker is expected to switch employers twelve times in their career, it’s a really good idea to get a standalone policy that isn’t affected by where you work. Employer plans are often free or only cost a few dollars per month, but employers aren’t going to continue to pay your life insurance policy if you stopped working for them.
The bottom line is to only use employer plans to supplement your current life insurance policies to ensure you always have some amount of coverage.
Term Life Insurance vs Whole Life Insurance
When you are ready to buy life insurance, you will be choosing between term life insurance and whole (cash value) life insurance.
Term policies are only valid for 10 to 30 years. Whole life policies never expire until you cash out, pay the entire policy amount in premiums, or die.
Seven out of ten life insurance policies sold today are cash value life insurance policies such as whole life, universal life, and variable life insurance. With cash value policies, you pay the same premium for your whole life. Because cash value policies also earn interest, they are often sold as a life insurance policy with a cash-value which continues to build over time inside investments.
While most insurance agents love to sell cash-value policies, I am not a fan of them at all.
- Monthly premiums are 10x – 12x higher than term life insurance
- Investment rate of returns are absolutely horrible over the life of the policy in comparison with the average market returns
- When you die, the insurance company pays out the death benefit and keeps your investment
Term Life vs Whole Life Example
Let’s look at the math with our friend John. He is 30 years old, in excellent health, and doesn’t smoke. He wants a $500,000 policy that is equal to ten times his current income to cover his regular salary, pay off his home mortgage, and protect the family’s assets if he were to suddenly die.
Term Life Insurance
- Term Length: 20 Year
- Coverage Amount: $500,000
- Monthly Payment: $20.17
- Total Paid over 20 years: $4,840
John and his family are covered until he turns 50 years old. The most he will pay is $4,840 and his family will receive $500,000 if he passes away in the next 20 years.
Now, let’s look at the same scenario using Whole-Life Insurance.
Whole Life Insurance
- Term Length: Lifetime
- Coverage Amount: $500,000
- Monthly Payment: $319.14
- Total Paid in First 20 Years: $76,593
If John elects to buy whole life, he will pay $300 more per month to have guaranteed coverage for the rest of his life.
Although cash value policies can earn up to 5% interest on account balances, most whole life policies only have a guaranteed rate of return of 1%. Since inflation averages 3% – 4%, you are actually losing money over time.
If John invests the difference ($300 a month) he will have earned $98,150 more in 20 years than the whole life policy that only earns 1%.
*assuming 8% rate of return over 20 years
Does paying $300 less per month for similar coverage sound good to you too? Exactly.
This is why term life insurance is the only life-insurance option we choose for our family and the only type we recommend. It’s simple, affordable, and still protects your family when the unthinkable occurs.
The Simplest Way To Get Term Life Insurance
Ok. You already know you need term life insurance and haven’t applied for it yet because you don’t understand the lingo or the application process.
Therefore, let’s make this as simple as possible…
Haven Life makes the application process simple and straightforward and you can get approved instantly without a medical exam in 20 minutes or less.
Because they have streamlined the application process and specialize in term life insurance only, they can offer lower policy quotes for you and your spouse than other life insurance providers. You can also compare their quote to other credible life insurance providers to make certain you are receiving the best rate possible.
While the general recommendation is to get a policy worth 10 to 12 times your annual salary, your circumstances might be different. Using the life insurance calculator will calculate the exact amount you need after answering a few basic questions regarding your age, salary, family, and current amounts of debt.
You might still be hesitant to get term life insurance today. You may tell yourself you will wait to do it later, you don’t quite understand it, or you don’t think you’ll ever need it. However, don’t forget about Valerie’s story.
There are only two certainties in life: death and taxes.
Please don’t wait for premiums to increase or for the chances something to happen in life where you are no longer insurable or it’s too late. Your family (or the family you will create in the future) are depending on you.