Buying life insurance is an important financial decision, so we want to make sure there are no misconceptions standing in the way of you getting—or keeping—the right coverage.
“I have coverage through work; I’m OK.” While it’s a nice benefit to have, life insurance through work is a perk, not a plan. If your family relies on your income to make ends meet, most group coverage (what your coverage through work is called) won’t be enough. Why? Because you’ll be deceased for a long time. We’re not trying to be funny here. Think about it. Most employers offer one or two times your salary in coverage, meaning your family could be OK for the first year or two. But what happens in year three and four and five … you get the point. An individual policy can round out your group coverage.
“The house is paid off and the kids are out of college, I can get rid of my policy.” Not so fast! A lot of people have suffered significant losses to their 401(k) s and other retirement-savings vehicles. That might mean you are still trying to make up for losses in your retirement nest egg. Add to that the fact that people can spend 20 to 30 years in retirement. Life insurance can ensure that if something happens to you, your spouse or partner will be OK financially in retirement even if you haven’t closed the gap in retirement savings.
“I’m young. I have time to make a decision about getting coverage.” We all think we have time. But, sadly, that’s not the reality. Take the story of Preston and Tara Newby. They were in their early 20s with one young son, and another on the way, when Preston was killed helping a stranded motorist. You can watch their emotional story here. Thankfully the young couple had life insurance and Tara was able to use the death benefit to rebuild her family’s life. Their story shows us that while we can hope for the best, we need to prepare for the worst.
“I’ll buy term and invest the difference.” On its face, this seems to make sense. When you’re young and in good health, you need the most coverage you can afford and term life insurance is the less expensive option. But what happens when that term ends in 20 or 30 years? The question becomes: Do I still need life insurance? What happens if you’ve become uninsurable during that time and find you need ongoing coverage to take care of a family member, for example? The solution might be a combination of term and permanent life insurance—the type of coverage you keep as long as you pay the required premiums. Here’s some additional information that may help answer your question.
And remember, you don’t have to go at this alone. A life insurance professional can help you get the type and amount of coverage that’s right for you.