4 Questions Everyone Must Ask About Life Insurance

Certifiied Financial Planner Michael Rubin reaffirms that there are four simple questions everyone must ask about life insurance.

“I know that talking about death isn’t fun,” Rubin states. “But failing to put life insurance in place is among the riskiest things you could do to your child. You’d never leave your son alone on a bridge. You’d never look the other way while with your daughter on a boat. Life insurance is much more that just the safety railing or the life raft. Life insurance is you looking after them, just in case, some day, you’re not.”

Here are the four most frequently asked questions about life insurance that, left unanswered, can prevent a parent or spouse from taking the right steps.

Question # 1: Do you need life insurance?

Not everyone will answer this question exactly the same way. You need to consider who will be harmed financially by your untimely demise. If it’s only your hair stylist, you don’t need life insurance. But if you’ve got children, or have a significant other or parent who depends on your income, life insurance is critical.

“It is not only those making an income who need to be insured,” says Rubin. “Even if you work full-time in the home and receive no salary, there is a tremendous financial cost to the survivors resulting from your early death. How would your surviving husbandor wife be able to keep his job and perform all your responsibilities if you were gone? Quite likely, it would be impossible. It is life insurance on the homemaker spouse which would enable the surviving spouse to keep the job he has and afford to hire others to help with the tasks you formerly performed.”

Question # 2: How much life insurance do you need?

Your main goal with life insurance is to satisfy your family’s needs for a specific period of time after you are gone. As a parent, you are protecting your husband or wife from having to work for the rest of the time your children were expected to live in the home. Another consideration is for your children’s expected college expenses. Take advantage of the tools available such as the Efinancial Life Insurance Calculators to get a firm grip on the amount of insurance that’s right for you.

Question # 3: What kind of life insurance should you buy?

While there are circumstances where whole life insurance policies make sense, most young families with limited budgets need to maximize their protection per dollar spent and choose term insurance. You pay premiums for the specific length of time (the term) the policy covers. If you pay your premiums and you die during the term of the policy, your beneficiary receives the life insurance proceeds. If you do not die during the term of the policy, you get nothing. It’s that simple.

Generally speaking , you’ll see you can afford much more protection for the same dollar amount buying a term policy compared to a whole life policy.

Question # 4: Where do I buy life insurance?

“Even if your employer offers you a life insurance benefit at work, you owe it to yourself to get a quote for a private policy. Especially if you are young, healthy, and a non-smoker, you’ll likely find that a privately purchased policy will be less expensive than the one offered to you at work,” states Rubin.

Keep in mind that life insurance you purchase privately does not depend on your continued employment at your current job. When you go to work for another company or take some time out of the workforce, you can keep your privately purchased life insurance. This is called “portability.” Life insurance purchased through your employer is typically not portable, since it is usually not available to you should you leave your job. In most cases, this is true regardless of the reason you leave: quit, layoff, or disability.

Important questions, one and all. Let a fast life insurance quote from Efinancial help you find the answers!

Exercise Your Financial Fitness

A Denver-area financial planner has a message to those who want to outlive their life insurance policies. Your physical health plays a fundamental role in your financial independence as it relates to term life insurance costs.

To illustrate her point, the author, who is an advisor at the Heartland Insitutute of Financial Education, considers two hypothetical life insurance customers. Bert and Ernie represent two 30 year old men purchasing $200,000 in 30 year term life insurance from a highly rated carrier. They are non-tobacco users and have no family history of cardiovascular disease or cancer.

Bert is 6’0” tall, is of average weight with a BMI of 22, has blood pressure of 120/80 and a cholesterol level of about 180, with a total cholesterol/HDL ratio of 4.

Ernie is also 6’0” tall but is clinically obese at a BMI of 32. His blood pressure is 140/90, his cholesterol is 220 and he has a total cholesterol/HDL ratio of 6.

Based on these parameters and assuming no other mitigating factors (such as a sky diving hobby), Bert would qualify for a rate of about $35 per month. Ernie does not get off so lightly with a quote is $66/month.**

Besides the possible cost disincentive for Ernie to obtain life insurance at all, which is unfortunate considering that he is more likely than Bert to need to have coverage for his family, the difference in cost can impact long term financial goals.

To see the difference, consider the future growth of $31/month (the difference between Ernie’s premiums and Bert’s) invested for 30 years at a hypothetical return of 8%. The total investment of $11,160 over time would compound to a little over $46,000.

To throw another variable into the loop, if Ernie uses tobacco, his insurance could run about $135 per month. That difference of $100 per month compared to Bert’s non-smoking, good health quote translates to $36,000 that could be invested in retirement savings. Compounded at 8%, this represents a total value in 30 years of $149,000.

Finally, in the worst case scenario where Ernie actually does die before the age of 60 from a heart attack, he has now negatively impacted his childrens’ ability to obtain affordable life insurance because they have to disclose a family history of cardiovascular disease.

The conclusion? In a society where we are seeing continuously increasing obesity rates, the pressure for insurance companies to hedge their risk will force rates to rise. Individuals can control some of this price increase by maintaining good health. Although weight may not be an individual factor for life insurance quotes and some conditions are hereditary, obesity is recognized as a contributing factor to cholesterol and blood pressure problems. A healthy diet and regular exercise will not only improve your quality of life now, it may also improve your family’s financial prospects for years and generations to come.

Brits Opting for Term Life

God save the Queen! When it comes to her royal subjects, a greater number of consumers in Great Britain are choosing to purchase term life insurance over its whole-of-life alternative.

Steve Wroe, spokesperson for independent financial adviser Life Direct, said that many Britons are still unaware that whole life products can now offer guaranteed premiums, meaning that they do not necessarily have to pay more upon renewal.

He added that while whole-of-life policies are more expensive than their term counterparts, they fulfil their purpose well.

However, Mr Wroe noted: “There’s no point in insuring yourself for a whole of life policy for hundreds of thousands of pounds if it’s just intended to cover your children whilst they’re growing up.”

Term life insurance products pay out a lump sum upon death during the term period, which can be anything from a year to 40 years or longer, while whole-of-life insurance policies pay out a certain amount whenever the holder dies.