Life Insurance: Some Facts, Tips and Basics

“I have life insurance through my employer, so I don’t need any more coverage.”  That’s a common statement heard across the country, especially from young professionals who believe they’re bulletproof and that tragedies won’t strike in their near or distant futures. 

The reality is, just as our parents predicted, time flies. Before you know it, you’re in your 40’s and 50’s, your temporary life insurance policy remains at $50,000 and your lifestyle has grown, requiring six times the income since your younger days. 

Lately, I’ve conversed with many people who don’t understand the ramifications of not having an appropriate strategy in place regarding life insurance and how various policies can work to assist in planning for the future.  One awakening moment, which often comes too late in life, is when we experience the costs associated with caring for our parents as they age as mature adults.
 
Question: Will our kids be around to take care of us?  Is it fair to unload that burden on them at a time when they are in the heart of their earning potential and possibly raising a family of their own?  And, even if they are willing, why not compensate them?

There are many reasons to have life insurance and I won’t dwell on them in this slice.  Many are technical in nature, others very simple and straightforward. That being said, I firmly believe everyone should be aware of some important facts concerning life insurance: 

• The life insurance you have with your employer typically ends the day your employment ends.  Therefore, your life insurance is temporary. Also, your employer can decide to cancel term life insurance as a benefit without your consent.
• Term life insurance policies work nicely for specific periods of time. A solid example of this is when you want to protect someone from financial loss, like while your kids are in school and dependent on you.  Term life insurance is the least expensive option and it does end, hopefully, before your life does. 
• Permanent life insurance policies come in many different forms and are designed to last for long periods of time.  Many policies in this category have enhanced attributes that allow you to build cash value and provide access to the cash in a tax qualified manner.  This option, though more expensive, is beneficial should you choose to use benefits while you’re living (when applicable) and certainly upon your death. 
• The younger and healthier you are, the lower your premiums.  The older you get, notwithstanding good health, the more expensive life insurance becomes.  My advice? Quit smoking – that’s when your policy is most expensive.

Too many people begin to understand how life insurance works after they’ve grown older when their rates are much higher.  So, those willing to listen, pay heed and think about your life and the tools that can assist you in taking care of it.  

Here are situations when you might consider a life insurance product:

• When you’ve established yourself with an income and you have someone you care about who might need help in your absence (i.e. spouse, children).
• When you’re approaching retirement (10-15 years out) and looking for ways to assist in funding your retirement years.
• When you’re in business and have a partner(s).
• When you’re contemplating how to fund long-term-care expenses for you or a spouse.  

There are many other more complicated scenarios that would support looking into a solution involving a life insurance product.  Just remember, we insure a lot of our possessions so why wouldn’t we insure our lives?  Currently, the financial risk of loss due to a house fire is approximately 1:1200.  The financial risk of loss due to long-term-care needs is 1:2. The probability of death is certain, employer paid life insurance is temporary and you should always hold the power in your future life decisions. The ball is in your court with a solid life insurance strategy.