For the most part, almost everyone would agree that a good life insurance policy is something that’s a necessity. In the event of a tragedy, you wouldn’t want to leave your loved ones with a pile of bills and the fear of uncertainty. The problem is that only about 57% of the population currently has any type of coverage. (Life Insurance Statistics and Facts) And of the 57% that do have a policy, most of the time the policy in place isn’t sufficient to cover the necessary expenses in the event of the unforeseen. A rule of thumb when considering a coverage amount should be 5 to 7 times your annual income. For example: If you earn $50,000 a year, the minimum policy that you should have in place is $250,000. The coverage amount should be predicated on several factors which I will discuss in a future post.
So why does 43% of the population not have any coverage at all? Many online tools have made shopping for life Insurance much like shopping on Amazon. However, this method has some inherent problems and mostly leaves the consumer asking for more information. What type of insurance should I purchase? What are some of the factors that I should consider when make my selection? What type of benefits, if any, should be included? Whats should be the coverage amount and for what length of time? How much is all of this coverage going to cost? These are some of the question that a consumer needs some guidance in answering, and unfortunately, the internet can provide many of these answers but will deliver the responses without a personal touch or insight.
Let’s look at the top 4 reason why having a policy, the right policy, should be a part of any financial wellness plan.
1 – Anyone married and/or owning a home and/or having children. The minute that the well-being of someone else dictates whether or not I will be able to survive without out them, is the moment Life Insurance becomes an absolute must. When we are young and have little responsibility, the need for life insurance really isn’t that large of a necessity. However, after marriage and the hopeful arrival of children, the need for income protection shoots up the board of the must haves. Personal income protection would provide a safety net.
2 – Anyone who co-signs on a loan. Another instance where life insurance provides protection is when co-signing on a loan. Example: Mom and Dad are so excited that their son was admitted to Duke University, Not wanting Junior to take on massive student loan debt all on his own, co-sign on a private loan for him to attend and pay for school. There are no issues until Junior passes anyway prematurely at the young age of 30. At this point Mom and Dad are on the hook for the balance of the loan. Personal income protection would provide a safety net.
3 – Work provided Insurance isn’t Enough. Work provided life insurance is great in that it usually will provide a minimal amount coverage for very low monthly premium. However, work related Insurance plans have 3 significant draw backs. One, the policy is a group policy which means you, the individual, do not own the policy. As such, you are not afforded any ownership benefits. Two, the coverage amount is never enough of what you, the covered client, should have in place. And finally three, since you do not own the policy, when the day comes that you change employers for whatever reason, you are no longer covered by the policy. Personal income protection would provide a safety net.
4 – Youth is not misspent on the young. The best time to purchase is life insurance is when you are young. Rationale for this is because you will more than likely never being in better physical shape and you again more than likely will have any permanent life conditions which might raise your insurance premiums. As you get older, insurance premiums get more expensive due to age, current health and any medical conditions. This is why it’s highly recommended you get the necessary amount of coverage, for the maximum time period at an early age.
5 – Living Benefits. Some life insurance policies provide for a “living benefit”. In the event of the policy owner being diagnosed with a terminal illness, a portion of the death proceeds can be withdrawn while the policy owner is still alive to help cover medical expensive or other unforeseen expenses. The benefit is not available in the majority of work related plans. Personal income protection would provide this safety net.
Life insurance should be viewed as a defensive strategy of a financial wellness plan. The purpose of life insurance isn’t to make your beneficiaries millionaires. The concept is to replace a loved one income for a minimal period of 5 years in the event of an unexpected loss.
What type of Life Insurance should one purchase will be the topic of an upcoming post.
Need a free one on one consultation on getting your loved ones properly protected? Email me at: Louis@louisromero.com