Friday, December 19, 2014

Let's Talk Life Insurance

In my Financial series, I talked about the importance of having insurance, especially health, but life insurance is another one of the crucial insurances to have.  A husband that doesn't provide life insurance for his family must not care for his family's future because in the event of his death, he has left them with nothing.  A Godly husband will make sure his family is taken care of in the present and future - especially upon his death, right?  If he doesn't, he is knowingly leaving them with no financial security and a life of hardship upon his death - that just doesn't sit well with me.  This is my opinion of course but in reality - all husband's plan for their family's future upon his death - he either plans for them to have something or he plans for them to have nothing! 

What kind of life insurance should you buy?  Only term life insurance is a good investment, anyone that tells you different is probably trying to sell you whole life insurance or they have been duped by it and are too afraid to admit the truth.  Term life insurance guarantees for a specific term - whether it is, 10, 15 or 30 years.  If you have health problems, it will cost more, so a wise way to purchase life insurance is when you are young and healthy.  Here is a scenario for a family starting at age 20:

Age 20 - purchase 15-year term life insurance
Age 35 - purchase 30-year term life insurance, which will cover you up until retirement age of 65

If you follow the above plan, you will probably get the best rates and you will be covered until retirement age of 65.  You don't need life insurance after 65 if you prepared ahead of time by investing in retirement.  If you didn't invest and have little or no retirement - well, get ready to fork over a good chunk of your pay for life insurance because it will cost a lot at age 65.  The goal is to insure with life insurance until retirement and then live off your retirement, which will be yours and your wife's end-of-life living.

Most healthy adults can get the standard rates but if you want preferred plus rates, you will need to make sure you are in optimal health before applying.  I recommend before your renewal at age 35 in the scenario above, that you do several things to ensure you get the preferred plus rate.  Why?  Well, preferred plus will save you a substantial amount of money and lock in that rate for 30 years!  You will save on average $10,000 by just being in optimal health and qualifying for the preferred plus rate.

Follow these tips to have a good chance at getting the preferred plus rate:

  1. Pray - believe me as we know from experience - GOD CAN DO ANYTHING!!!
  2. Be at a normal weight for your height - if you aren't, strive to get there before applying or at least make sure you are within a few pounds over
  3. Go on a low-salt, vegetarian diet a week or two before your exam - this will ensure, in most cases, a lower blood pressure and good blood sugar results
  4. Cut out stress well in advance of your exam - stress can raise not only your blood pressure but other important things in your blood which could prevent you from getting a preferred plus rate
  5. Get a lot of sleep the night before - sleep as much as you can (9+ hours) before your exam, this really does make a difference in all your blood results and BP

Buy from a reputable, long-standing company that has a good chance of being around in 30 or so years.   A lot of people realized in the past financial crisis, that their "cheap" life insurance was not worth it as they lost their policies when their life insurance companies failed.  I would recommend spending slightly more for a good company that won't likely fail - preferably a mutually-owned company.

Some may wonder how much should you invest in for life insurance?  If you are starting out in your 20's, you could think of it one or two different ways.  You could say, well, I'm young and I probably won't die before we renew our next policy at 35, so I will go with a low amount now.  Then, when you reach 35, raise it to a level that suits your family's needs.  Or you might say that you want to ensure as much as you can since your wife and kids will be left alone for many years, so you will get a large policy.  Some men, don't want their wives to ever think about working, so you will need to purchase a large policy.  Others, just want the house and bills paid and then the wife will find a job in a few years, so they will choose a lower amount.  It is up to the husband and wife but I think the best option is for the policy to ensure the wife will never have to worry about money or working and so she isn't a burden to her children.

Policies usually range from as low as $10,000 to a million or more.  Do the calculations and find out what it will take to live on for how many ever years.  Most people can get by with $250K by investing it and letting it grow and living on a small amount each year.  Others, prefer to go higher with a $500K to $1M policy to live in comfort and also invest.  Of course larger amounts cost a lot more, so base it on what you feel is best for your family and how healthy (or not) you are.

What about your wife and children?  If the husband will suffer a substantial loss in the event of his wife's death, then he should insure her life as well.  You will want to get small policies on your children for, God forbid, their burial and funeral expenses.  Hopefully, that will never happen but if it does, you will be glad to know it didn't ruin the rest of your life financially and you can just rest and mourn.

If you are unable to afford life insurance, ask yourself if that is really true.  Most people can give up a few luxuries like smartphones or lattes and afford a policy.  Do you care about your future and your children's future?  How will you pay for the burial and funeral expenses of your spouse?  If you are a homekeeper, then what will you do for work if your husband dies?  Where will you put your children and how will you pay for daycare?  Why not alleviate all that stress and the hard work, that will be the rest of your life, and ensure your future?  No one should have to worry about money when also mourning the loss of a spouse - Be WISE!

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