In this post I’ll share how to protect what you value: your family’s financial future. I’ll focus on the why and how of getting term life insurance.
The reason I’m focusing only on life insurance is two fold: most other forms of insurance are required (e.g. home owner’s insurance if you have a mortgage, auto insurance) and life insurance is something a lot of people need, but just haven’t taken the time to purchase.
I realize I could also devote another whole email to spending less on other forms of insurance. That is important. But not as important, I believe, as getting those without life insurance, who need it, signed up with a policy.
A good place to get started for term life insurance is with MetLife. MetLife has been providing insurance for more than 140 years to millions of consumers worldwide.
What is Life Insurance?
Life insurance is a contract between the policy owner (you) and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual’s or individuals’ death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount called a premium at regular intervals or in lump sums.
What Life Insurance is Not
Life insurance is not an investment opportunity. I’m of the opinion that investing and life insurance are two separate things. Why the heck did investing and life insurance ever get involved? Insurance products that promise investing returns are just an expensive waste. Keep investing simple, inexpensive, and separate from your insurance goals.
Life insurance is not a waste of money. You aren’t just throwing money away. Therefore, cheap isn’t always better. Make sure you get the proper amount, type, and quality of life insurance.
Term Life Insurance Is Best for Most
For most people, a simple term life insurance policy will do. Term life insurance ends after a specific period (or term). This makes it less expensive than other forms of life insurance and it also matches the specific needs of most people. Most people have dependent people (kids, stay at home spouse, etc.) in their life for around 20 to 30 years. After the kids have left, and you’ve built up retirement savings, there’s not much need for more life insurance.
When to Get Life Insurance
I’m of the opinion that life insurance isn’t needed until there is a dependent relationship established. Once you have someone in your life that relies on your income and is unable to produce that income by themselves if needed, then you need to look into life insurance. For most people, this means when they get married and/or have children.
How Much Life Insurance Do You Need?
This is probably the most personal decision you’ll need to make when getting life insurance. It really depends on several factors: your current and expected monthly expenses, your current and expected savings funds, your current and expected debts, your spouses ability to work full-time even without you, etc. The list could go on. Luckily, there are plenty of calculators out there that will help you come up with an amount that’s right for you. Also, the cost difference between $500,000 and $1M in term life insurance isn’t that great, so it won’t hurt to over insure by a little.
Read how I personally came up with my own life insurance amount.
Where to Get Life Insurance
There are lots of places to get life insurance. You can check with your employer, the company that insures your auto or home insurance, your bank, or at a life insurance broker, like Zander Insurance. The key is to shop around, get quotes, look for discounts, and make sure you use a highly rated company. Check ratings at www.insure.com.
A while back I polled some members of the personal finance blogging community and got the scoop on where they got their life insurance.
I personally ended up getting my 20 year term life insurance plan with ReliaStar (a company under the ING name). You can see their rates at www.ingforlife.com.
Get Started Now
Don’t put off this need any longer. It takes some time to get set up with life insurance, so it’s important to get started early. Here’s a post I shared a while back about going through the process of buying life insurance.