Life Insurance During Uncertain Times

 

Uncertain times can cause people to think about what matters most in life. The coronavirus has given us the opportunity to care for those who really need us, whether it be a grandparent, parent, or child. What would happen if you were not alive? A lot of people get busy with work, marriage, kids, etc. and they just do not get around to thinking though the importance of life insurance. If you are alive, you will most likely find a way to provide for those who depend on you. If you are NOT around anymore, what will your loved ones do? How will they financially survive? If you do not know the answer to those questions, it would be prudent to do a little research and speak with an experienced, independent life insurance agent who can give you options and explain the differences between term and whole life insurance. In addition, work with an agent or firm that will be able to help your beneficiaries if the worst happens. Ask the agent if they have ever actually paid a death claim and worked with the beneficiaries in collecting the death benefit proceeds.

The very first thing you need to know about life insurance, there is a place for both types of life insurance, if you are speaking to an agent who only sells term life insurance… run! If you are speaking to an agent who only sells permanent whole life insurance… run! There is a place for both term and permanent life insurance. It is common for insurance agents to have very LOUD opinions on which type of insurance is “best”, but there is hope, there are balanced life insurance agents who can help. Term insurance is wonderful for pure life insurance coverage because It is the lowest cost way to protect those you love. If you plan on saving money in your company sponsored retirement plan (401k, Sep IRA, 403b), then you probably won’t need life insurance for the purpose of income replacement anymore at some point in time because if you live until retirement age, you will have hopefully saved a sizable nest egg you would leave behind. The decision to purchase term life insurance while you are working makes a lot of sense. But, if you want your insurance to last forever, you will most likely outlive the term policy, and permanent life insurance is the only way to guarantee the policy to age 120.

Generally speaking, churches who subscribe to Dave Ramsey will teach curriculum encouraging their members to purchase term insurance instead of whole life. We’re not sure where the reasoning comes from to only recommend term life insurance, but hey, this is a free country. Additionally, call centers who advertise on television usually have an agenda to push term life insurance. Can you hear it in your head? “A 40-year-old male can purchase a $500,000 term life insurance policy for less than a dollar a day.” Some say it is because permanent life insurance is “too hard to sell over the phone”, and it would be a “profitable business model”. Other organizations such as A.L. William’s Primerica will say to “buy term and invest the deference”, and frankly speaking, they have some great points if someone is disciplined enough to “invest the difference”. But what are people supposed to “invest the difference” into? It feels a little like, “you need to go to the gym and workout”. Duh, but what do I do when I get to the gym?

Permanent life insurance which is commonly referred to as “Whole Life” and “Universal Life” works well if someone wants their life insurance to be guaranteed until they die, or to be able to access the cash value in retirement or for whatever they want. Permanent life insurance policies also have chronic illness riders for long-term care insurance planning, policy-owners can use the death benefit while they are still ALIVE for qualified triggering events such as cognitive impairment or the inability to eat, bathe, dress, move around, bowel control, and help using the toilet. Furthermore, the premiums can be structured in several ways to guarantee the premium and death benefit pool of money for chronic illness expenses. Conversely, traditional long-term care insurance policies have seen huge rate hikes over the years and policy-owners have cancelled policies because they could not afford the premiums anymore. It would be wise to explore both term life insurance and permanent life insurance options and decide for yourself. Work with someone who has the knowledge and patience to figure out the right plan.

Determining the correct amount of life insurance is easier for some than others, but, if you need help an experienced agent should be able to assist in calculating a suitable death benefit. Generally speaking, a good rule of thumb is 10 times your annual pre-tax income minus your liquid net worth. So if someone makes $50,000 per year, times that by 10 and you get a death benefit of 500K, now minus the money in your checking, savings, and investment accounts, that would be the number for the life insurance death benefit, which is commonly referred to as the “face amount” on the life insurance application. If now is the right time to have a 15-minute phone conversation… go-to-meeting… or zoom… reach out to us. Call or schedule an appointment with Carter or Gina online www.pacificinsurancegroup.com, we welcome the opportunity to listen to your situation and make recommendations based on our independent product knowledge and multitude of insurance companies we can shop in order to get you the best deal.

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