Although this isn’t a fun topic to talk about, think for a moment, what would your family do if you died today. How would they pay for your funeral? What about the mortgage next month, or next year? or groceries? or college? Even for a stay at home parent, how would the family function without you? What would be the cost to replace the dozens of tasks that you complete to make the family work? Term life insurance is the number one gift to give to your family, Now I am talking about necessities here. Not investments, not estate planning, but protection to maintain your families standard of living in your absence.
The way term life works is simple. You pay a small monthly premium, that is fixed for a set number of years, and in the unlikely event you pass away, the amount of the policy is paid out to the beneficiary on it. Term life is easy to get, it’s inexpensive, and necessary. Term life is substantially more expensive for smokers than non-smokers, which says something about smoking.
I do not recommend whole life or universal life plans. These plans are relatively complex instruments that are substantially more expensive on a monthly basis and combine insurance with investments. The investment portion is a poor performer. Typically the only people who recommend such policies are those who are selling them because they earn substantial commissions on the policies. For protecting your loved ones, Term life is the way to go. Keep insurance as insurance and investments as investments.
At Zander Insurance, rates can be compared without giving away any personal information. Here are a few examples:
Amounts are YEARLY premiums
25 year old male
10 year $500,000 policy non smoker: $168 smoker: $620
20 year $500,000 policy non smoker $240 smoker: $800
25 year old female
10 years $500,000 policy non smoker: $148 smoker: $480
20 year $500,000 policy non smoker: $210 smoker: $650
Although Social security insurance provides some money for survivors, it isn’t enough, especially for a stay at home parent who either has no earnings or low earnings. Term life insurance is tax free. It is highly important to name a beneficiary and to update the beneficiary information if it needs to change over time. The goal should be to have a policy that can replace your income, so having roughly 10-15X your income in coverage is necessary.
Get a quote from Zander Insurance and apply for life insurance TODAY. They will usually send someone to your home to fill out a questionnaire, take your blood pressure and a urine sample. It takes about an hour, which is well worth the peace of mind you deliver to your family, knowing that they won’t be in a financial jam if you pass away.
Who needs life insurance:
Anyone that has financial dependents: If your absence and the absence of your income would negatively affect others, you need life insurance. Parents with minor children need it the most, but also married couples with one primary breadwinner need life insurance as well.
Stay at home parents: Although it is difficult to calculate the value of a stay at home parent in monetary terms (I’m leaning towards priceless) It is clear that the replacement cost of the function of a stay at home parent is high. A minimum of a $250,000 policy should be purchased, while a $500K policy may be necessary depending on the age of the children and income level of the family. Getting life insurance for stay at home parents is crucial.
There is no need to have life insurance on minor children, (you don’t depend on their income.) The only time when a parent should have life insurance on their children is if they co-sign for student loans. While I highly recommend never co-signing for student loans, that children should attend community college, in state schools, and work and save money to pay for college, some people are going to do this anyways. In a worst case scenario, Junior goes to college to become a lawyer, has a $100,000 in student loan debts that mom and dad signed for, and he passes away close to graduation. Now mom and dad owe this debt, but don’t have the education or ability to earn the money to pay it back. A $100,000 10 year policy on a 18 year old is an almost negligible cost. ($83 a year!), and would have avoided this situation that can lead to bankruptcy.
There are some people that don’t need life insurance. For those without children or a spouse who depends on their income, it isn’t necessary. Those who are self insured through amassing a large amount of wealth don’t need life insurance either.
While I hope to be around for another 60 years, tomorrow is not granted to us and we have to acknowledge that. It is of the utmost importance to plan for these situations and it is the kindest gift we can give. Make sure that your beneficiary know about the policy, the insurance agency that holds it and the policy number. When my sister in law passed away in 2014 she left behind 2 young kids, with no life insurance. Mrs. C. and I are currently raising her children. Nothing will ever replace her, but the financial hardships would have been greatly reduced had she purchased life insurance.