9 Minute Read
Life insurance—meh, I’ll pass.
If you’re like some people, you probably have insurance for everything under the sun—like your car, your home, and maybe even your cell phone. But do you have life insurance?
A study by LIMRA found that only 60% of Americans have some type of life insurance.(1) That includes term life insurance, cash value life insurance, or even life insurance offered through a group plan from their employer. That’s a pretty shocking statistic when you consider 100% of us aren’t guaranteed a tomorrow.
Do I need life insurance?
Almost everybody needs life insurance. Don’t believe us?
Life insurance can be important no matter what stage of life you’re currently in. Here’s why:
The Young Professionals
If you’re young, you might feel like you’re invincible and will live forever. Life insurance is for old people, right? Wrong.
If you still have student loan debt weighing you down, it would be wise to have a small term life insurance policy in place to cover your debts upon your death. But if you’re completely debt-free, with no dependents, then all you really need to worry about here is burial costs. That said, you probably have enough coverage with the life insurance policy offered through your employer.
How do you know you have the right insurance coverage?
While you don’t need life insurance in the same way that a family of five would, here’s another way to look at it: Life moves pretty fast. You won’t always be this young—sorry to break it to you. It goes without saying that the more young and healthy you are when you buy term life insurance, the cheaper your plan will be. Just keep that in mind as you get closer to getting married and building a family.
Congratulations! You’re just starting your new life together. Between all the legal forms, change of address notices, and wedding thank-you cards taking up your time, it’s easy to forget other details that need your attention—like term life insurance. But go ahead and add it to your list!
If the two of you are paying off debt, your untimely passing would mean your new spouse would be stuck footing that bill by themselves. Yikes! Don’t leave your mate unprepared to deal with your student loans and credit card bills.
It’s not just you anymore! You’re a team, and one of the best things you can do for your spouse (other than faithfully loving them until death do you part) is to provide security for them through term life insurance.
Ever since the moment you held your child for the first time, you’ve wanted to do everything within your power to protect them. As a parent, it’s fairly easy to see why you need life insurance. You want to have the peace and security of knowing your family would be provided for if something were to happen to one of you. You would also want to minimize any disruption to the lifestyle of the household and make certain your children’s college education is covered. Trust us, you want and need this peace of mind.
But what if one of you is a stay-at-home parent?
Some people make the mistake of not getting a life insurance policy on themselves or their spouse because they’re the stay-at-home parent. They think since they aren’t bringing in an income that can be measured in dollar signs, they don’t need life insurance. But that couldn’t be further from the truth.
As a stay-at-home parent, your impact on your children and the benefit you bring to the household is invaluable. If the stay-at-home parent were to pass away, your family would immediately take a financial hit. That parent’s absence would cause a large portion of the working parent’s income to shift in order to cover the high cost of child care. Ouch! Child care costs aren’t cheap these days! Don’t leave your family to manage that kind of strain on their own.
At this point, you might already have a hefty retirement savings in place. And whether you’re single or married, your death may not have a negative impact on the finances of anyone else. You could even be well on your way to becoming self-insured! That’s a great place to be! But what if you’re still working the Baby Steps and don’t have your retirement savings set just yet?
Having a life insurance plan in this stage of life is only necessary if you still have dependents who rely on you to eat and have a roof over their heads. Let’s say you are still paying off your house and trying to add to your retirement savings. If you died today, and your spouse no longer had your income to rely upon, would the amount in your savings be enough to take care of them?
Want to make sure your family is covered? Check on your coverage before it becomes an emergency. Take our 5-minute coverage checkup to make sure you have what you need.
How does life insurance work?
So, how does this life insurance stuff work anyway? Life insurance exists for the unthinkable—the untimely death of you or your spouse. It will cover loss of income, funeral expenses, and other financial needs that might come up after one of you passes away.
You enter into a contract with your policy holder (the life insurance company) and pay a premium each month to keep the policy valid. If you or your spouse dies, the insurance company will pay the policy amount to the beneficiaries (those you’ve selected to inherit your money).
What types of life insurance are there?
When it all boils down, there are basically two different types of life insurance options—those that exist for a predetermined term and those that last through your entire life. These two types of life insurance are commonly known as term life insurance and cash value life insurance (sometimes called civil or whole life).
Term life insurance
Term life insurance provides coverage for a specific amount of time. If you or your spouse passes away at any time during this term (typical terms are 10, 15, 20 or 30 years), your beneficiaries will receive a payout from the term life insurance policy.
Term life insurance plans are much more affordable than whole life insurance plans. That’s because the term life policy has no cash value until you or your spouse passes away. In other words, it’s not worth anything unless one of you were to die during the course of the term. Then that’s when you receive money.
Of course, the hope here is you’ll never have to use your term life insurance policy at all—but if something does happen, at least you know your family will be taken care of.
Cash value life insurance (whole life, universal and variable life)
A lot of people think cash value life insurance will help them retire wealthy. But the truth is, cash value life insurance is one of the worst financial options out there! Dave often calls it the payday lender of the middle class.
Cash value insurance lasts throughout your entire lifetime. You might think it’s a good thing to have life insurance coverage for that long, but here’s the truth: If you practice the principles we teach, you won’t need life insurance forever. Ultimately, you’ll be self-insured. Why? Because you’ll have zero debt, a full emergency fund, and a hefty amount of money in your investments.
And not to mention, the premiums on cash value life insurance are generally more expensive than term life insurance. Cash value life insurance costs more because it’s designed to do just that—build cash value. But keep in mind that a life insurance policy shouldn’t be an investment or money-making scheme—it’s simply meant to provide security, protection and peace of mind for your family should the unthinkable happen.
What is the best type of life insurance?
Now that’s an easy one-term life insurance! It’s no surprise that we’ll always recommend you use term life insurance. And by now, you might think we sound like a broken record. And that’s okay. We’ll say it again: You need term life insurance! It’s the plan you should have to protect your family. Cash value life insurance is a complete rip-off that also carries a more expensive monthly price tag.
When can you cash out or sell a life insurance policy?
If you’re asking, “When do I get my money?” know that you won’t actually get any money. Your beneficiaries will be the ones to receive the policy payout after you pass away.
If you have a type of permanent insurance (cash value, whole life, etc.), selling your policy for cash is known as a “life settlement.” This is basically selling your policy to a third party (individual or company) for a cash payment. They’d be the ones who receive the cash out upon your death. That’s a little weird, right? Yeah . . . we think so too.
If you had a cash value life insurance policy, you’d have the option to borrow against it. But we’d never recommend that. And we don’t recommend having a cash value life insurance policy either so, this just got a little awkward, didn’t it?
Term Life Insurance: A Better Plan for Your Future
So, you know it’s time to take the next step and get life insurance, but maybe you still aren’t sure where to start. The answer is simple—term life insurance is the best option to protect you and your family. Remember, life insurance is protection and security for you and your family, not an investment.
Don’t put it off another day! Get your free term life insurance quote in just a few minutes from Zander Insurance—the only company Dave Ramsey recommends for term life insurance. For the best rate on term life insurance that fits your needs, contact Zander Insurance today!