A question about life insurance?
Also, what kind of insurance should a 30 year old married father of one buy?
Answer:
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After that, my recommandation is get a 30 year term. Financial experts say you should get at least 10 times your gross income worth of coverage. At the same time, save about 10-15% of your income into a qualified retirement account.
you should ask a life insurance guy about it. be careful not to fall for everything he's telling you.
Go for straight term life. Do not lef an insurance salesman rope you into getting whole, or some other "cash back" policy. They sell those as investments, when they really aren't investments. If you yourself invest the cost difference between term life, and whole/cash back, you'd make more money than the cash back amount. A life insurance policy is simply to ensure that your family is taken care of in the event of your untimely death. It's not an investment. Make sense?
Term, It gets pricey as you get older, by then you want need it.
You should examine your life style at the moment, taking everything into account (Pension, Savings, existing Life Cover, etc).
First priority is to cover your life, so that your income is replaces should you die. You need to examine how much of a lump sum your family will need to replace your income (making sure you index-link the amount so your family will be protected against inflation)
Secondly, look into Permanent Health Insurance. This will replace your income should you become incapacitated.
Also look at pension - build up a fund for your retirement
You need the most coverage you can get. That means a "term" policy.
You get the most bang for the buck, but there is no residual value and you will have to find a new policy at the end of the term.
There are 10 and 20 year fixed term polices available. Get one from a highly ranked (AA or better) life insurer.
I agree with the "buy term" advice. Whole Life, Universal Life and other cash value insurance products are rarely appropriate and then only as part of a larger plan which would be laid out by an estate attorney or fee-based financial planner who has lots of experience and can show the tax strategy involved. Unless you are worth at least a million, I doubt you need anything but term.
As far as how much you need, think of it this way -- You need enough to replace your income so your loved ones won't suffer financially on top of emotionally should you pass away. Consider the money will be put into some "safe" investment(s) such as highly rated municipal and corporate bonds or CDs.
Since there are expenses like transportation to and from work and retirement accoutns involved with your current income, you might not need to replace ALL your income. On the other hand, make sure to account for things that you do that will need to be hired out -- maybe auto repair or gardening.
Once you know how much you need to replace, plot it out on a spreadsheet, and plug in a benefit amount to see if it would take care of the needs. If you feel you wife could be self-sufficient without you, but need to provide for your child's needs, calculate through school years. The closer you are to the end of his or her school, the less insurance you need.
Make sure to account for your wife inheriting your retirement and/or social security (but don't place too much credence on a government benefit.)
Since term insurance is pretty cheap, you will find that you probably need more than you thought but that you can shop around and find a good price on it if you buy term.
ABSOLUTLEY agree with sassy ( * applaudes * ) You get a term life policy. You figure how much you will need for you family to live for many years without you if you were to die NOW.
Figure how much your spouse will need annually for the rest of her life if your spouse does nothing to support herself , such as : she needs $50,000 a year to pay the bills and live comfortably. Now double that number and add a zero = $1,000,000 should be the amount of the term life insurance policy. sound high ? well then the spouse will need to get out and get a job or else lower the annual amount needed to live. : )
This simple calculation works for finding out how much you need to have saved for retirement years too ! Good Luck and ONLY choose a term life policy!
Hi, your friendly insurance guy here again! :)
Your question has two parts, which I will answer momentarily. First, though, I will address another point, which is to respond to prior answers to your question.
Those that say "Never buy anything but term" are incorrect to do so. There are valid cases for other types of life insurance. Like any other financial decision, it's simply a matter of making sure you know which one is correct for your situation. While in a great majority of cases term life is the way to go, it's wrong to suggest it is the ONLY way to go. It's doubly wrong because of what I call "the Suze Orman effect". Suze Orman listens to people for about 30 seconds on the phone and then gives them financial advice. I work in the industry and I could lose my licenses for doing that kind of thing. Your question is a general one, requiring a general answer. Any respondant thinking you provided enough information to know for certain what type of insurance is best for your situation is wrong. For all we know you could be a multimillionaire business owner who happens to be looking for key man, a buy-sell, and a section 162 deferred comp vehicle but just did not express it. and to those respondants who don't know what those things are, that's why I suggest that we not tell people for sure what plan to use till we know their situation clearly.
The poster who mentioned using a fee-only advisor was on the right track, as he was seeking to get you objective advice. I happen to disagree on principle with the "only use a fee based advisor" approach, however, because if you do, you are going to pay him to tell you what kind of insurance go get (probably pay him a LOT, too) and then an insurance agent is STILL going to get a commission on the insurance sale, so your dollars are paying more people. Also, thefee based advisor knows exactly who he's sending you, and your premium and commission dollars, to long before he presents his recommendations because just like the rest of us he has associates he trusts and likes to work with. A different option would be to find an independent agent that is not beholden to any one insurance company and interview him without buying to get his opinion. See how he (or she) does the needs analysis and how deep into your financial situation the go while evaluating. Avoid an "order taker" or someone who seems committed to only one company or product type.
Ok, onto your questions.
What kinds are there?
1. Term Life.
You buy it for a set period of years. Make sure it is both level premium and level death benefit, renewable and non-cancelable. It is usually available in terms of 5, 10, 15, 20, 25 or 30 years. For whatever number of years you contract, the premium stays the same. After that you can renew it but the premium goes up. Way up. Like "you'll be begging for mercy" up. Appropriate use: When you have a specific need to protect something or someone that only lasts a particular period of time. Example: Your child is 18, starting college, you are paying, it's $40,000 a year or so, so maybe a 5-year, $160-200K term policy is appropriate so that if you die the child still gets to finish college. Actuaries, the statisticians who determine the costs to insure people, design term so that 99%+ of term policies never pay out. Pure money makers for the insurance company, but loest cost short term safety for theclient. Other types of insurance may be "swankier" but if you die, the only thing people will care about is "how much" insurance you had, not "what kind" you had. Always make sure you have the right amount as your primary concern, then worry about type.
2. Universal Life (UL). More expensive than term (usually 2-4 times as costly) at the outset. Provides (typically) level premium and level death benefit. After a term contract expires and goes into yearly renewal,the term premium will tend to shoot up way higher than the never-changing UL premium. UL must be properly designed atthe outset. If set up correctly it will never lapse. Appropriate use: Older clients who cannot get underwritten for term insurance due to age restrictions. Younger clients looking for permanence in insurance without hte higher out of pocket costs of Whole Life, knowing that after that 20-year term expires that they will be paying a LOT less for the UL than to keep renewing that term policy.
3. Variable Life. part of your premium goes to support the death benefit, part goes into separate accounts in the stock market. Death benefit and cash values of the policy fluctuate with the performance of the separate account. Because insurance should push risk away from you, I am not a big fan of this as I like to use insurance to PROTECT my clients, not risk their money in the market and worry that if they die their beneficiaries may not get enough. Appropriate use: Clients whose insurance needs are met in other ways, have money to invest, are already maxxing out their qualified plans through work, their individual IRA/Roth, and want someplace to sock money into the market knowing that when they die, that money will have tax advantages the rest of their estate will not, and which can go around the probae process.
4. Whole Life. Costing 8-11 times as much out of pocket as term, this is the "cadillac" insurance product Big, big premiums. As one poster suggested, it is NOT an investment. Investment is aterm limited to other products and it is against regulations to present Whole Life as an "investment." It accrues a cash value over time and is designed to last for the insured's whole life, hence the name. The death benefit also increases over time, unlike most other insurance. It should not be used as primary insurance if using it would mean the insured would not be able to get enough death benefit for his or her premium dollars Remember: Get the right AMOUNT first, then the right TYPE. Appropriate uses for Whole Life include:
Insurance for highly compensated, but high liability professionals (doctors, lawyers, accountants, etc) who are likelyto be sued, as the cash value in life insurance contracts has special protections from seizure by civial action.
Entity Purchase Buy Sell Agreements
Key Man Policies
Section 162 Deferred Comp programs.
And, oddly enough, as a way to insure small children in such a way where a little bit of money now will get them an ever increasing life insurance policy at a time when their age ensures the premium cost will be as low as possible (10-pay whole life on a newborn is a neat thing if you have ever seen what it can do).
For a 30-year old married man with one child I would suggest that all we can really tell is that you have a definite life insurance need. You have family to protect. Without knowing more about you I cannot give a reliable assessment of your needs.
The benefit of term is that it is cheap. The benefit of UL and Whole Life is that, unlike term, so long as you pay the premium (and eventually it WILL be cheaper than continuing the term coverage) you know your family is going to get the death benefit money. The added benefit of Whole Life is that you don't have to die to make some use of it.
Overall, I suggest:
1. Learn as much as you can about Life Insurance and the four major forms of it.
2. Find a good, local, objective, independent agent to consult. Find three if you like. If you want to go with a fee advisor, do so. Go with what makes you comfortable. Get the most objective advice you can (and the poster who suggested that was right to do so even if we disagree on how to get it). If you'd like to speak with me feel free to send me a Yahoo! answers mail.
3. Make sure you understand the needs analysis and agree with it before you buy.
4. Get the insurance. Nothing stinks quite like needing it but not having it. Most of us have known people who died and very few of them were people who have said to us "But thank goodness he had enough life insurance to pay off everything, fully fund the kids' educations, and fully replace his income so we can try to move on with our lives." I'm sure we've all seen people's surviving family have money trouble, though.
Remember that life insurance is not there for you to make your family rich when you are dead. It's not there to leave them in the lurch. It's there to help them carry on. I like to use the phrase, "Keep the clients in the world they live in now." They already have enough problems with a loved one gone. Making sure they don't ALSO have financial burdens is a positive thing.
Best wishes and I hope you find a good, local person to work with. :)
Did you forget MPT, Bright Future.Mortgage Protection Term? Sometimes this is the most important kind of "life" insurance to have, because it pays off the mortgage on the home.
I got online advice
There are two main types of life insurance:
1. Whole life insurance is a plan of insurance for life, with premiums payable for a person's entire life.
2. Term life insurance, provides coverage for a specific period of time, usually from one to thirty years. Term policies provide a death benefit only if the insured dies during the term.
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