Life insurance can be so confusing! Do I need it? How much do I need? What kind? When I start working with a new client on life insurance, I am often relied upon for direction on what type of policy to buy, how much and from what company. As a 30 something year old I realize that many of my peers do not know the least bit about life insurance and how it works. At the most we know there are several options, term, universal and whole. Most rely on a quick google search, Suze Orman or Dave Ramsey (both who I respect and follow) and some rely on a financial planner or insurance agent. BEFORE (this is important) I got into the industry, I was intrigued with how money works, how wealth is built (especially when it was not passed down to you), how to build a sound financial plan and quickly my curiosity was peeked by life insurance. I challenged myself to work through the details of life insurance to better understand it. I never planned to be in the industry.
I started researching and learning about life insurance. Life happened and I fell into a career as an agent. Once I became an agent, I realized that most of my peers, family and clients trusted me with helping make an educated decision about life insurance and I did not take that responsibility lightly. So, I mention before because I did not start researching, learning and educating myself on life insurance in order to sell it and I highly suggest you do the same! I did so in order to make better decisions for myself and my family. I knew that no one cared about me and my family more than me. My parent's have worked so hard to provide for me and my brother and give us better opportunities than they had and it pains me to even think about them not having a retirement, not being able to afford a quality life or not being able to give them the proper homegoing service due to lack of funds after years and years...and years of hard work and educating themselves in order to attain their goals. I even started thinking about what would happen if I expired before them. Would I leave them strained financially taking care of my responsibilities after all they have sacrificed for me?
There are so many opinions, advice and motives out there when it comes to life insurance. It is so important that you purchase what is best for you and your family's needs. I found myself trying to lean on the advice of many in the industry only to hear a different recommendation 6 months down the road. Now that I am very knowledgeable on life insurance after years of researching and educating myself, I am appauled when an advisor or agent tells you that term is best for you or whole or universal before even knowing your situation, needs and financial budget.
MAKE SURE YOU UNDERSTAND YOUR OPTIONS AND THE NUMBERS. The numbers never lie. Know your own needs. Take the information given, but do the math on how a given policy will benefit you if something were to happen now, 20 years or 40 years from now. Think for yourself and look at the facts. Many industry professionals are available to help but at the end of the day, they do not have to walk in your shoes when tragedy hits, when a bill comes for tuition, when your policy lapses because you can't afford it or when you become disabled and can't work. Here are some things to consider when deciding on how much and what kind of life insurance:
1) What are your current financial responsibilities? Debt, mortgage, child's tuition, etc.
2) What expenses do you want and need to be covered in the event something were to happen to you? Bills, children's activites, replacement of income, etc.
3) Are you self-employed? This can play a factor in the type of policy and how much you need.
4) Are you currently investing and do you have a retirement plan?
5) How much is in your estate?
6) Will your estate be passed down and what will be the probate fees, costs and taxation? This is HUGE and I will come back to this at another time.
7) How will you handle your responsibilities and generate income if you were to become disabled, sick or terminally ill?