Life insurance is an important tool to protect your loved ones financially if you die before financial goals are met.
An ethical, competent insurance agent doesn’t want you “worth more dead than alive” or want your budget so consumed with insurance payments that you can’t meet your financial goals. Knowing what life insurance you need can help your agent meet that need.
If you discuss finances with friends and family, it’s not reasonable to assume their approach will meet your needs. Besides having different assets, goals, income, and expenses, you also have a different personality.
Have a professional assess your needs. There’s generally not a single solution to fit every need.
If you are, for example, a married individual with a working spouse, a home with a mortgage and a 6-year-old child that you want to help with college, there are several needs to address. You want to replace your income if you pass away before you retire, and you don’t want your family to sell your house or have drastic changes in their financial situation.
You may need several policies: one to pay the mortgage, one to put money away for the child’s college and one to provide money that you would have earned had you lived to retirement. Depending on your age, you might be able to buy term policies that coincide with the goals. So if you have 20 years left on your mortgage, perhaps one policy is 20 years, one is 15 years to cover your child’s college expenses, and perhaps you have a whole or universal life policy.
You might get comparable policies on your spouse. Unless you and your spouse earn the same amount, you policies might be for different amounts for each of those goals. You are trying to replace your or your spouse’s income, not to end up better off than if you both lived.
Too often, families buy only permanent insurance such as whole life, universal life or variable universal life insurance. While these policies can serve an important role, they are more costly than term life insurance. Goals with identifiable time frames, like college education for kids or paying off a mortgage, are generally less expensive.
Many have heard the financial mantra “Buy term and invest the difference.” This is an admonition to buy term insurance and invest the difference in what a premium would be for permanent insurance and what term insurance costs. But if you don’t invest the difference, you still risk not meeting your goals.
Author: Linda Leitz
Source: © 2020 Produced by Colorado Springs Gazette
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