Term Insurance often is the Cost-effective, Flexible Answer when Dealing with "What if?"
By Taw Jackson - Advisor, Personal Insurance
The goal of life insurance is to have it before you need it. Actually, before your survivors need funds to pay burial costs and the bills of maintaining their lives when you are no longer there.
What if?
When reviewing life insurance there are many different options. So make sure to meet with a trusted advisor and have him or her assist you in determining which option is best to achieve your goals.
What if the unthinkable happens?
For many people, their need for life insurance is temporary. The mortgage will one day be paid off, the cars and other debt will one day be paid off. The children will grow up and be independent.
Because their need is temporary, term life insurance often proves to be their best and most cost-effective option for life insurance.
While some find it difficult, term life insurance is actually not difficult but very simple.
Think about the "what if," what if you passed suddenly (car accidents, sudden acute illnesses, ski crashes, etc., - all do happen). How would your family pay for your funeral and burial? How would your family pay the month-to-month bills? You have homeowners insurance to rebuild the house after a fire, but how about protecting your spouse's ability to make the mortgage payments? How would your survivors live and what would they need financially to do that - and for how long? If you have children, how long before they will be grown and on their own?
A quick "what would my spouse need to deal with?" check list is outlined below:
- - Final medical bills
- - Funeral and burial
- - Monthly income needs of the household
- 1. Insurance
- 2. Food
- 3. Gas
- 4. Mortgage/Housing
- 5. Utilities
- - Maintenance Expenses
- 1. General debt - credit cards, cars loans, school loans, etc.
- 2. Children - clothing, educational expenses, sport/activity expenses
- 3. College funding
- - When will the children be independent
- - Anything else you'd like your survivors to have money to do
This list - and its dollar figures - will change depending upon whether you are the primary breadwinner for your family, a stay-at-home parent or financially in between. And when thinking about insuring a stay-at-home parent, make sure to think through how you would be a single parent - for example, would you need to hire a full-time nanny or day care? A part-time nanny for after school? A housekeeper?
With the list together, meet with your insurance advisor to learn the pricing for a policy that would ensure your desired funding. Like all insurance, pricing of term life insurance policies is based on your age, your medical history and the total dollar amount. (Citing health history, term insurance carriers may increase policy pricing or deny it completely.)
Put that information against the reality of your monthly budget, what you can afford to pay for. You may well find out that your "dream policy" is beyond your wallet and you need to take another look at your list with an eye to "needs" versus "wants." Or, "what I have to accomplish with this policy funding" and "what I want to accomplish." For many, this involves serious and thoughtful discussions between the adult partners of the family.
Working with your insurance advisor can help you find the balance between funding needs and the insurance policy you can afford.
Going through this exercise, many people will find they need such insurance funds to carry their survivors for 20 years until the youngest child is 21 and the house mortgage is paid in full. For others, it might only be 10 years. A term life insurance policy can be written to fit your time line.
Once the policy is in force, there are pieces that cannot be changed. Items such as length of the term or the amount of coverage are locked in for the life of the policy. Sometimes as people get older and financial circumstances change they add another term life policy - adding financial protection - or they might apply for a brand new policy to replace the existing one. Again, age, medical history and policy dollar figure will determine the price of any new policy.
Taw Jackson specializes in term life insurance and enjoys trusted partnerships with experts in the life insurance field. Taw is located in the Kalispell office of Payne Financial Group. He can be reached directly at tjackson@pfg-insurance.com.
