Why Buy Life Insurance?
It seems a simple question, right. Yet, many Americans have no life insurance – zero, zilch, nada. Why is that? The answer may be simply that life insurance is an optional insurance product that no one is truly required to buy.
Yet, everyone will die. Everyone will need buried. Even the most basic funeral costs money. However, most people want something more than just a cheap wood box. At least your family likely does. An average funeral today is expected to cost upwards of $15,000 or more. Do you have fifteen grand saved for your own funeral? If no, then life insurance is for you.
Dying with Life Insurance and Dying without Life Insurance
We’ve seen clients and friends die with life insurance and without life insurance. I can tell you first hand those families who received a life insurance check are in much better shape than those who did not prepare ahead of time. Imagine the stress of losing a loved one. Now imagine how much additional stress is involved if your finances are a mess on top of losing someone you love.
Besides Paying for a Funeral Why Should I Buy Life Insurance?
Most people that buy life insurance want to ensure their spouse and even children are left better off. They want to make sure bills are paid – the credit card, the car payment, the mortgage payment and provide additional monies to cover the air conditioner going out, the car breaking down, putting kids through college, paying typical household bills.
Remember, if you die your paycheck dies too. If you are breadwinner and die, your paycheck is not coming home again. How will your family survive financially without you working and earning a living?
How Much Life Insurance Should I Purchase?
Companies that advertise on television often state that you should buy 7 – 10 times your annual income in life insurance. One simple rule of thumb has always been that a surviving spouse could take a lump sum of money from a life insurance policy, invest it and receive 7 – 10% interest on this money. Thus, receiving the same money they were getting while a spouse was still alive without dipping into the principle too much.
The big downside to this approach is the current economy. Who makes 7 – 10% interest reliably & comfortably today?
What are the types of Arizona life insurance?
There are three main types of life insurance.
You usually see term life insurance advertised on television because it is the lowest cost for a pre-retired person. Term life insurance is great for younger people and families with children because it gives you the maximum coverage at the lowest rate. However, if you want life insurance in place during your senior years this is the worst life insurance product for you.
Whole life is considered the Cadillac life insurance policy in the industry since it was developed. Premiums are level for lifetime, meaning they will never increase even as you get older. Your premiums earn an interest rate, which builds cash value. These policies also typically earn dividends, which means they participate in the profits of the insurance carrier. Cash value and dividends can either accumulate inside the policy for you at some later date or can be used to purchase additional insurance, which means your death benefit can increase over time. The downsides to Whole Life are few except that this type of plan can be expensive if you try and apply for a new policy later in life.
These policies have a level premium that will never decrease as long as you pay your premiums. Your premiums can earn interest. However, some UL policies earn no interest. The premiums in some types are used to help your premiums remain level for life. The one downside to Universal Life insurance policies are few but be sure to consult with an agent before withdrawing cash from these policies.
While most consumers today are very familiar with term life insurance there are two other major Arizona life insurance plans available. Everyone has seen the term life insurance advertisements on television. Some companies have inundated the airwaves with their commercials.
You may not realize it but the odds are excellent that you are playing a Las Vegas game of chance with your life insurance. I call it Gambling with Life Insurance. And if you are on the wrong side of the gamble the chances are great that you are playing with a decked stacked heavily against you.
And if you lose with your life insurance bet, it is your spouse and kids who really lose.
Have you ever watched one of those Las Vegas tv shows that show you all the ways to gamble and they also tell you which games have the worst odds of winning?
Term Life Insurance is the game of life insurance with the worst odds of paying off. People are attracted to term insurance because it is the cheapest form of life insurance, at least in the pre-retirement years. So what do most people do? They buy term life insurance.
Yet, insurance companies love term insurance because of three primary reasons:
1) Premiums will go up significantly as you age, forcing you to cancel as they become too expensive to keep. Advantage Insurance Company.
2) With term life insurance, people tend to buy, cancel, buy, cancel their term policies. That means the insurance companies keep all those premiums without ever having to pay a death claim. Advantage Insurance Company.
3) Very few death claims are filed on term life policies compared to other types of permanent life insurance. That means nearly all those term insurance premiums you pay are pure profit for the insurance company. Advantage Insurance Company.
What type of life insurance shifts the odds to YOUR favor? Permanent Life Insurance
Not long ago I surrendered my term policy for a permanent policy. I shifted the odds in my favor that my life insurance will be inforce when I die so that my family will receive that money when I die.
If you have term life insurance just know that your policy will more than likely be expired or cancelled when you die. Those are the odds the insurance companies love because you pay in all those premiums for a policy that will never pay to your spouse or kids.
Life is certainly unexpected.
About an hour ago I wrote an article on my blog about life insurance.
A few minutes ago a client calls. I have her auto and homeowners insurance but we do not have their life insurance. Her husband passed away a few weeks ago due to cancer. He was 34 years old.
While he had a little bit of life insurance he leaves behind a wife and two younger children. To adequately provide for all the needs of a single mom with two young children a person would need several hundred thousand dollars of life insurance (in my opinion).
Are you married?
Do you have kids still living at home?
Do you have a mortgage payment?
Would your family suffer financially if you died today?
Do you provide income into your household?
If you want to talk about shifting the life insurance odds to YOUR favor, please call or email me.