Why is life insurance important? Great question! Life insurance is important because it covers our assets and our asses. Life insurance protects you and your family from unforeseen death, loss of income, etc.
Life insurance should be applied uniquely to individuals based on their current income and needs, while also accounting for future goals. The #1 problem to avoid with life insurance is imperfect fit: buying too much, too little, or the wrong type.
Remember: the CORRECT life insurance policy is BOUGHT, not SOLD. Don’t make a costly mistake… here’s what you should know before you go:
- Know how much life insurance you can afford to buy
- Know how much insurance you need & why
- Understand your L.I.F.E. needs (liabilities, income replacement, final expenses, education)
- Know the type(s) of life insurance policy you want & why
Let’s take a closer look into 1 through 4, above. Here’s what you may want to consider:
- Check your budget: of your disposable income how much are you willing to spend on a must-pay insurance bill?
- How much insurance you need is entirely up to you, but some rules of thumb estimate 5x-10x annual salary. Try a few quick and easy life insurance calculators.
- Do you want to pay off your house (liability)? How many years do you want to provide your family with income? How much will your funeral cost? Do you want to provide money for your children or spouse to go to school?
- Staying focused on the basic policy types (term and whole life insurance) – we’ll outline the pros and cons below!
Here’s an example of the cost differences you can expect to see between term & whole life. Costs of life insurance are based on factors such as your health and age. This example uses a healthy 25 year old male:
As you can see, the whole life insurance policy costs are substantially larger, but there are pros and cons to each!
Remember: the CORRECT life insurance policy is BOUGHT, not SOLD. Don’t just take my word for it…here’s additional information:
- Reasons to convert term life insurance to whole
- What to know before you buy
- Mistakes to avoid…
- How life insurance salespeople make money (P.S. more money is made by selling whole life insurance…you guessed it! A salesperson will likely try to sell you WHOLE life insurance. P.S.S. Whole life insurance may be what you need/want, but this is why you must KNOW before you GO.)