Too many Americans have no life insurance. Their loved ones may pay dearly for that choice.
September is National Life Insurance Awareness Month – but it is always a good time to think about the value and importance of insuring yourself.
According to a recent Bankrate survey, 42% of Americans have no life insurance at all. They may not know that life insurance coverage has become much more affordable than it once was.1
Many people ask if life insurance is really worth the cost; maybe you are among them. The simple answer to that question is yes. It can be stunningly cheap: a healthy, non-smoking man in his thirties may pay less than $45 a month for a $1 million 20-year term policy. Permanent life insurance costs more than term life insurance, but permanent life policies can build cash value over time; term policies cannot.2
Life insurance is about managing risk, and if other people rely on you financially, you need to have it in place in case your passing puts them at financial risk. When a spouse or parent dies, there are financial matters to address: a sudden lack of income for a household, bills and mortgages or rent to pay, final expenses such as funeral or cremation costs, and the cost of children’s education. Without adequate life insurance coverage, a household is hard-pressed to meet these immediate, financially draining challenges.
Many growing families have inadequate life insurance coverage. The Bankrate survey discovered that 37% of parents with children under age 18 had no policy at all. Some younger families find coverage through group plans, but perhaps not enough: 32% of the survey respondents raising minor children said that the death benefits on their life insurance contracts were $100,000 or less.1
The problem of inadequate coverage seems to plague households of all ages. A five-figure life insurance payout can pay for a funeral, but it will not offer much economic insulation to a family after a wage earner dies. Bankrate found that 47% of the Americans who have life insurance have policies with coverage amounts of $100,000 or lower. Twenty-one percent of Americans have policies with death benefits of $25,000 or lower.1
How much coverage is adequate for you? Ideally, you should determine that with the help of an insurance professional. As a rough rule of thumb, the death benefit on a policy should be about 15 times your income. If you are considering a term life policy, the term should not end before your envisioned retirement age.2
Life insurance can also be valuable while you are alive. A policy with cash value components may grow over time. After a while, you may be able to borrow against the cash value. Sometimes the payout amount on these types of policies can be adjusted as well as the size of the premiums. Of course, you must keep paying the premiums to keep any kind of permanent life or term life policy in force.3
While you may decide you prefer one kind of policy over another, the important thing is to have coverage in place – not just to reassure yourself, but those you love. Life insurance can help a spouse or a family maintain financial equilibrium at a time when it is most needed.
Rob Siddoway, JD, MBA, CFP® is an Attorney with Tetrant Legal and an Investment Advisor Representative with Tetrant Advisory LLC (An Arizona Registered Investment Adviosr) and may be reached at www.TetrantLegal.com, (888) 852-8070, or Rob@TetrantLegal.com.
This material was prepared by MarketingLibrary.Net and are the views of Peter Montoya, Inc., not the named Representative or the Registered Investment Advisor, and should not be construed as investment advice. Tetrant Advisory LLC does not give tax advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting, or other professional services. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. Please consult your Financial Advisor for further information.
1 - bankrate.com/finance/insurance/money-pulse-0715.aspx [7/8/15]
2 - forbes.com/sites/timmaurer/2016/01/05/10-things-you-absolutely-need-to-know-about-life-insurance/ [1/5/16]
3 - nerdwallet.com/blog/insurance/should-you-consider-cash-value-life-insurance/ [5/6/15]