(MP) You will spend any amount to secure the future of your family, which is one of the reasons you will buy life insurance. However, before you chose, I’d like to help you up your money management game and save you big money on protection, all you have to understand are three fundamental truths about the industry.
1. You only need it if your death would cause financial hardship to your love ones. If you’re not married OR part of a working couple without children OR your children are grown and you have a pretty decent retirement plan, you may not need it at all.
2. Whatever life insurance you need, you can buy on your own – without the help of an agent.
3. You probably need less coverage than you think.
Life Insurance Truths are Told
Calculate Your Coverage
You won’t have to look far to find a calculator to help you determine exactly how much coverage you need. You’ll find one at Kiplinger Online or simply follow the rule of thumb that your life insurance coverage should equal eight-to-ten times your annual take-home pay.
Lean toward the low-side of that range if you have more than two children to educate, if your spouse works full-time, or if you have a low outstanding mortgage.
Lean toward the high side of that range if you have more than two children to educate, if your spouse does not work, or if you have a high outstanding mortgage. You wouldn’t want your family to be homeless, in the face of your demise.
How long to Insure For?
You only want life insurance if your death would cause hardship to your family. Once that danger passes, so does your need for insurance. You can reduce coverage once the house is paid for and reduce it more when the children are educated. Once retirement for you and your spouse is secure, the most insurance you might need would be a small policy to cover burial expenses.
What to Buy?
The cheapest coverage in the long run is level-premium term insurance with the premium fixed for however long you’ll want coverage: 10, 15, 20, 30 years. The younger you are when you buy, the lower the premium. When the policy ends, let the coverage lapse and invest the money spent on premiums in growth investments for retirement.
Where to Buy?
Shop among direct sellers of insurance for lowest premiums. Use the many information services to get the best deal. Insurers save their best rates for those least likely to die suddenly. Let the insurer know if you don’t smoke, have a safe driving record and are keeping your weight within reasonable limits. Everyone really serious about money management will add insurance to their portfolio.