If you are married, have children, a mortgage, or other outstanding debts? Chances are you need some life insurance to help your loved ones/dependents should you pass away. (If you don’t have some of those things, you may NOT need life insurance – not every one has a need).
Lets take a look at a typical family – husband, wife and two kids. If the husband were to pass away, the wife would be left with one income to provide for the three of them. One income to pay for everyday expenses, save for college, two growing children and fund a future retirement. If there was a lump sum of money available to cover most (if not all) of these costs, that would be ideal.
Life insurance was designed for this primary need. Over the course of time, it has evolved into many products that have become lucrative for the agents selling it, and not a great fit for the person purchasing the policy. That is why it is so important to sit with an independent agent to fully look and help you choose a product that best fits your needs.
I get some coverage from my school and associations: do I need more?
Some school districts offer insurance based on your employment, but it’s rarely larger than $50,000. Some administrators get more based on their specific contracts, but this is rare.(very rare)
If teachers are members of the NEA (or other local / state teaching organizations) there is an optional life insurance benefit available through them, with benefits being around $100,000 in term insurance.
But a total of $150,000 is rarely enough for most people. Many people need at least $500,000 in coverage to cover their family’s future costs, lost income and lost retirement savings.
How much do I need?
This really depends on who you are, what life stage you’re in, what debts you have, and what goals you’re working towards! Everyones situation is different, and life insurance is definitely not a one size fits all kind of thing. Most financial professionals use calculators to determine how much insurance people should be buying – here’s one of my favorites.
Once you have an idea of how much you need, the cost of getting this insurance can vary widely depending on the type of insurance you buy.
What kind of insurance to buy?
There’s two kinds of life insurance: Term and Permanent
Term – this is purchasing pure insurance for a period of time. If you are 30 years old and want to insure yourself until you are 60, then you’ll purchase a 30-year term policy. A level-term policy will keep the premiums the same throughout the 30-years (recommended), but once you reach 60, that insurance will go away (or get a lot more expensive). This insurance is as cheap as you’ll find, as it expires and is a no-frills kind of policy.
Permanent – this is where the life insurance can serve for more than one purpose. Permanent insurance comes in various forms – Whole Life, Universal Life, and Variable Universal Life. These are variations of a life insurance policy with a savings account (“cash value”) attached to it. Whole Life policies have a fixed amount of growth to the cash value (i.e. 4%). Universal Life can assign this savings to a stock market index so it has the potential to grow faster or do a fixed rate of return. It also provides a lower premium than whole life. Variable Universal Life allows you to invest the money in the stock market through mutual funds to build up the cash value.
These policies can get confusing very quickly, and there seems to be a limitless amount of riders (additional benefits) that can be added to these policies. For the most part, these types of policies are not for everybody, as the price to get adequate coverage is costly if not set up correctly.
Who do I buy it from?
If you have an insurance agent that you work with, many of them are qualified to sell life insurance. However, not all of them are independent agents who can shop the best rates for your unique situation. That is why it’s always recommended to work with a broker(like myself) and I can shop multiple companies for you to get you the best product.
What do you recommend?
I’m a believer in “giving-you-options”, which is why I decided to become an independent life insurance broker. Ultimately the decision is yours, my job is to give you all the different options when it comes to life insurance and give you the “PROS” and “CONS” of each product. It is important to understand your options and to know that there is not a one size fits all kind of policy out there.
Still not sure how much you need, or what kind to buy? I do free life insurance reviews for teachers, so feel free to get in contact if you’d like help.