Next Drop in the Bucket- Life Insurance By Neil Fogarty
What happens when you die? I know, you are thinking this will turn into some existential debate about God, the afterlife, or reincarnation! Actually, I am talking about a different subject entirely. What do I mean when I ask what happens when you die? I mean how will your family continue financially in your absence? Luckily, there is something you can do about that immediately.
Not Talking Vitamins and Exercise
Hey, most of us could be healthier, but often sudden death happens without regard to physical fitness. The types of sudden events that reinforce the need for life insurance, however, only scratch the surface. No matter how you die, you need to cover your family. Unfortunately, so many of us in early adulthood see ourselves as invincible. Why would we need to waste our money on life insurance? Yet all of us have heard the stories of people suddenly dying, and their family is left with little money and a pile of debt.
So who needs it?
According to Lifehappens.org, everyone does! (follow this link to read further) “If someone will suffer financially when you die, chances are you need life insurance because it provides cash to your family after your death.” (Lifehappens.org) Unless you are Warren Buffett or Bill Gates, that probably includes most of us. However, there are even benefits for those who are in a great financial position. As Lifehappens.org reminds us, “Depending on the size of your estate, your heirs could be hit with an estate-tax payment of up to 45% after you die. The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of these taxes, funeral costs, and other debts without having to hastily liquidate other assets, often at a fraction of their true value. Life insurance proceeds are also generally income tax-free and won’t add to your estate tax liability, if properly structured.” See, life insurance can benefit anyone. Brad Montgomery of Montgomery Insurance and Investments provides some alarming statistics concerning folks that are at risk due to lack of life insurance. So, when do you get it?
I don’t need it!
Don Cain of Montgomery Insurance and Investments discusses three myths about life insurance.
Myth 1: I only need life insurance if I’m the primary breadwinner in my family. Whether you bring home the largest paycheck in your household or a smaller one, your family relies on your income to maintain its quality of life, and it would be missed if something were to happen to you. Even if you don’t work outside of the home, having life insurance is a smart choice. Stay-at-home parents perform valuable services such as childcare, cooking, housecleaning, and household management, which can be costly to replace for a surviving spouse or partner.
Stay-at-home parents perform valuable services such as childcare, cooking, housecleaning and household management, which can be costly to replace for a surviving spouse or partner.
Myth 2: If I buy a term life insurance policy and find that I still need protection when the term ends, I can always renew the policy. Term policies are quite popular with many young families, and for good reason: They typically offer the greatest coverage for the lowest cost. Term insurance provides protection for a specific period of time (the “term”,) and can be ideal for people who feel they have financial needs to cover that will disappear over time, such as a mortgage or a child’s education.
However, many families realize that even after the kids are grown and the mortgage is paid off, their need for insurance continues—to provide income for a surviving spouse, eliminate debts, pay taxes, etc. Because life insurance premiums increase with age, renewing your policy when the term expires can be very expensive. Moreover, poor health may make renewal impossible.
Myth 3: I only need term life insurance. Term life insurance makes sense for many young families because their need for coverage is great and their budgets are often limited. But that doesn’t mean it’s the only type of insurance you should consider.
Permanent life insurance policies provide a death benefit as well as other unique features such as lifelong protection and the ability to accumulate cash values on a tax-deferred basis, similar to assets in most retirement-savings plans. You can access the cash values for important uses like a child’s education or a business opportunity. (Keep in mind, however, that withdrawing or borrowing funds from your policy will reduce its cash value and death benefit if not repaid.)
Check out more myths here.
Sooner the Better
The younger you are, assuming you are healthy and a non-smoker, the cheaper you can get life insurance. Term life insurance for someone in their twenties is under $50.00 per month for one million dollars of coverage! Obviously, that number rises and falls based on how much coverage you desire. As you age you still can get good rates, but usually the younger you purchase the insurance the better. Get on it! Contact an insurance representative today to discuss options that may work for you.