What Kind of Life Insurance Should I Buy?
This is one question that has always baffled me because I’ve heard so many different opinions on the best type of life insurance to purchase. I’ve seen in more than one instance what happens when you don’t have enough and it’s not a pretty picture. Funeral arrangements aren’t cheap and it’s a tough situation when the burden falls on a loved one left behind. Not only do they have to deal with the loss, they also have to find a way to get you buried.
I think a lot of people tend to overlook life insurance because they feel it’s either not important or too expensive. The reality is that it’s something we shouldn’t live without. A quality $250,000 20-year term policy for a healthy non-smoker can cost under $300 a year (a little under $6 week). If you have some health issues the price goes up, but that’s all the more reason to buy it.
I personally have a mix of term and universal variable life insurance. I’ve heard all the arguments for and against this, but for right now this is our current strategy. If I die, it’ll be enough to cover my arrangements, pay for the house and start my kid’s college fund. With my next son on the way, it’s something that I’ll have to revisit when he gets here (only 2 more weeks). Having these policies adds a little more comfort in knowing that they’ll be fine if I’m no longer here.
It’s a grim topic to discuss, but death is inevitable. So why not be prepared? Read “What Kind of Life Insurance Should I Buy?” along with the comments when you get a chance. There’s some good information there that will start you on the path to finding the best type of policy for you.
* Finally, so I won’t get sued. I am not offering financial advice. Find a professional in the industry to help answer your questions. This website and the Internet should only be used as informational sources to help you build the right questions to ask a pro. Do your research.
April 20th, 2008 at 9:04 pm
You know Theo,
You bring up a very interesting topic that honestly a lot of folks haven’t thought about. I have heard that insurance should be a part of your retirement planning. I am sure that the industry was behind that public service announcement but that doesn’t mean that it doesn’t have merit.
My job provides an automatic policy of around $50K and I always purchase additional coverage to make sure that the house is paid off and my funeral arrangements are taken care of in the event of my demise. My wife does the same thing. We also purchased the accidental death and dismemberment insurance (in case a brotha loses a limb or hurts his head) because since we use our brains and type a lot we would be limited in the amount of income we could produce should one of them become imparied. Lastly, I have long term care insurance (in case I need a nurse for a period of time).
Some of the insurance was purchased through my company (which is bad because if I leave then I have to go and get it again likely with worse terms) and the rest is with obtained privately. I don’t remember if it is term, life, or whatever but you made me want to go and research that so that I can understand better. I guess if I had children I woulld take it more seriously and not gamble with their futures. Thanks for the insightful post.
April 21st, 2008 at 12:07 am
Thanks for the comment Phil. When it comes to building wealth, insurance should be a part of your plan. There are a lot of people who can sell you insurance, so it’s best to find someone you feel you can trust. Having a plan outside your job is a good way to go because if you leave it doesn’t travel with you.
I may do a podcast on this topic. I have a guy who could shed some light on the subject.
April 21st, 2008 at 10:58 pm
I was traveling for work today and on the plan I read an article in my “Smart Money” magazine. Guess what the topic was? It was long term care and how we view insurance.. The sooner you purchase a policy the cheaper it is. The funny part is that you are actually quite likely to need it. Here are some facts:
-Americans age 65 and over have a 40% chance of needing LTC
-55% of Americans over 85 are impaired seriously enough to need LTC
-Annual cost of private nursing currently $75,190 in 2006
-Avg cost of assited living in 2006 was $33,616
Now Americans generally pay for insurance when the cost of an incident is high. It protects them from making a big cash outlay. Clearly having to go on long term care can have a huge impact financially.
1 in 1,200 chance that your house will burn down
1 in 240 chance you’ll be in a car accident
1 in 15 chance you’ll incur a major medical expense
1 in 4 chance you will rack up a long term care bill
Hmmm…which one do we typically not protect ourselves against?
You also need to purchase this one outside of your employer (I did) as it needs to stick with you in order to leverege the early purchase
April 23rd, 2008 at 1:29 pm
Phil,
Thanks a lot for the statistics. I heard a statistic one time that major medical expenses is leading cause for people filing bankrupcy. While it may seem you’re throwing away your money insurance is important. Be it health, life insurance or long term care, getting it while you’re young is important.
April 24th, 2008 at 9:19 pm
The misses and I have have a blend of term and whole insurance through our provider. It’s enough to cover all the usuals in case one of us goes. It’s also enough to pay things off and so forth. We wanted some of it as a whole policy so we could feel like we were getting an investment out of it. I think the misses has a policy through work (like $50-60K). I haven’t picked up one of those through my job yet but I will soon.
I think the key is to buy early and don’t just get all term insurance. You have to feel like you aren’t just paying into something you’ll never get any benefit from.