Insurance Protection

Life Insurance

For peace of mind, nothing beats a life insurance plan that guarantees financial security for your family in case you are gone.

While nobody likes to contemplate their death, worries about loved ones left behind is one less burden on your mind when you have life insurance. It means that your family could endure a major loss and still remain in the family home. Your children would not have to cancel college plans. Your spouse would have money necessary to pay for your funeral, finalize estate matters, pay debts that you may have incurred and still be able to retire in comfort.

To put it simply, life insurance protects those who depend on your paycheck. If you die prematurely, life insurance provides your dependents with ongoing income to replace yours, until they can live comfortably without it. It can also provide a timely emergency fund for medical, legal, and funeral costs, should family savings not be adequate to cover them.

Given this simple definition of life insurance, it should be easy to decide whether you need it. Start by imagining yourself gone tomorrow. (We know, it's morbid, but bear with us.) What would the impact be?

Could your family afford the funeral expenses? Have you left a complicated will or perhaps no will at all? More importantly, what about your spouse, children, and other dependents? Are they counting on your paycheck in the years ahead to cover basic needs and/or future savings goals? If you are the primary caregiver to dependents, what will it cost to replace you with a paid provider, and for how long?

Term Life Insurance

For most people, term insurance probably makes the most sense. Buy just as much insurance as you need, and only for as long as you need it. With term insurance, you won't be paying anything extra as an "investment." Instead, put the money you save on premiums into better long-term investments -- such as stock market index funds, stocks you've selected on your own, or whatever you're most comfortable with. Your own investments may outperform any investment an insurance company makes for you. By combining term insurance with investments on your own, you'll be minimizing your insurance costs and maximizing your investment potential.

Another plus for term insurance is that it's a very competitive segment of the insurance business, with companies open to lowering costs to win customers.

The Federal Trade Commission offers these tips for saving money on insurance:

• If you want insurance protection only, and not a savings and investment product, buy a term life insurance policy.
• If you want to buy a whole life, universal life, or other cash value policy, plan to hold it for at least 15 years. Canceling these policies after only a few years can more than double your life insurance costs.

The SSA Disability Benefits publication claims that a “20-year-old worker has a 3 in 10 chance of becoming disabled before retirement age.” This means 30% are likely to need some kind of income protection for disability.

Government statistics from 1997 show that the same 20 year-old has only a 17% chance of dying before age 65, these odds continue to decline as we live longer and longer

Most of us consider health insurance as a critical need, especially as protection from serious illness or accident. Does it make sence to prepare for the medical costs of disability but not the costs of food and shelter for our families?

Disability insurance protects more members of your family than life insurance; in fact, exactly one more—you! For this reason, even single people, who have little need for life insurance should seriously consider disability insurance.

The bottom line: If you depend on your income to pay the bills, you ought to carry disability insurance.