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Why do you need term life insurance and what is it?

We all have different needs and wants in our lives, but one thing that most of us need is some type of life insurance policy.  We all want to believe we are invincible and nothing will ever happen to us. And I hope nothing bad ever does, but according to Guinness World Records, (this is straight from their site) “the greatest fully authenticated age to which any human has ever lived is 122 years 164 days by Jeanne Louise Calment (France). Born on 21 February 1875 to Nicolas (1837 - 1931) and Marguerite (neé Gilles 1838 - 1924), Jeanne died at a nursing home in Arles, southern France on 4 August 1997.”

There are 3 types of life insurance: Term, Whole Life and Universal.  I’m going to talk a little about term today.  It’s what my wife and I personally have (as well as some whole life)  and it’s what I believe the most in. Agents opinions about Universal life seems to be a mix of some love it some hate it and some like myself see value in it, but only for certain people.  Why buy it? Here’s the short answer later followed by the longer answer:

1.       To pay final expenses

2.       To cover children’s expenses

3.       To replace a spouses income

4.       To pay off debt

Term Life Insurance

Today I’m going to go over term life insurance.  It is what it sounds like. It is designed to last a specific period of time. At the end of that time, or when the term is up, the policy is finished.  Typically at the end of the term the policy is expired and you pay no more premiums after the term is up and do not get any money back.  There are variations of a term policy that allows you to get money back and renew it etc., but I’m only going to talk about a straight term.  The different variations should be discussed with your agent to see what fits your needs.  Term policies can be 5, 10, 15, 20, 25, or 30 years long. You get to choose the period of time you want the policy in force based on your personal situation.

Term policies are also the most affordable policies mainly because they expire at the end of the term and you get nothing back when it expires.  I know that doesn’t make it sound like a smart choice, but it can be. For example:

Say you are 30 years old, are married, have a house with 20 years left on the mortgage and a 5 year old child.  One option would be to get a 20 year term policy to last as long as the mortgage and long enough to get your child through college. After that you might not have a need for as much life insurance.  Let’s say your mortgage is $100,000 and you want your spouse to be able to pay off the mortgage and have $20,000 a year to raise your child if something were to happen to you.  $20,000 a year for 20 years plus $100,000 mortgage totals $500,000. That’s a lot of money, but that is a realistic number that your spouse would need if you didn’t make it home the next day.

 Now, most people see that and think there is no way they can afford that kind of insurance policy.  You can. A healthy 30 year old non-smoking male or female should be able get a policy like this for less than $25 a month.  I am willing to spend $25 a month for myself and $25 a month for my wife to make sure that we are financially taken care of is something happens to one of us.  I probably spend more than $50 a month between food spoiling that I don’t cook in time or snacks at the gas station.  If I can afford to do that then you better believe I will find $50 to make sure my family will be taken care of. If you are wanting to get a policy that gives you money back when it expires you will have to pay a lot more than $25 a month.  That’s why term policies are so attractive.  A lot of coverage for a low premium.

Why don’t people have life insurance? 

One reason is no one has ever talked to them about it. People sometimes don’t know where to get it.  Below I’ve listed 3 main excuses people give me when I talk to them. Remember, life insurance is one of many tools designed to help your family prevent a financial catastrophe.

1.       I can’t afford it.

a.       I already showed you it can be affordable. You don’t even need to get the exact amount you need. Just by having some insurance to make it a little easier for your family is better than nothing at all.

2.       I don’t need it

a.       Do you have a spouse and/or child?  Do you think you may someday pass away? Then you should at least talk to an agent about options out there.

3.       I don’t have time to meet with an agent.

a.       Really?  You don’t have a half hour? How long is Chicago Fire or whatever your favorite show is? An agent will go to you and is willing to work evenings and weekends.  Most of us can find a little time.

Now, let’s go back to being invincible.  We’re not. None of us are.  We probably all have been to a benefit for a family that had a premature death that created not only an emotional hardship, but a financial one as well. That’s why there was a benefit in the first place, because the family didn’t have life insurance. 

The bottom line, talk to an agent about life insurance.  Just start the conversation.  Find an agent you trust that has access to all the different options so you get what you need.

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