Do you need life insurance?
The answer is no. You do not need life insurance on yourself, but your spouse and/or children may need you to have life insurance. What is the best way to find out if and how much life insurance you need? Start with a conversation. A serious conversation. What would happen if you were to die today? The call comes in to your spouse. You are not coming home. Shock and utter disbelief. The first wave of panic is usually “How am I going to make it without him/her?” The second is “How are we going to make it financially?” The latter is much easier to solve for than the first with a little thoughtful planning and action.
What would happen if you were to die today? Could your spouse and family continue to live in the same house and lead the same lifestyle? Would you still want to provide for your spouse and children in the same way as if you’d lived a long, healthy life? Would you want to contribute to their college educations? Would you want to help pay for their weddings? The most successful life insurance planning is done with a detailed worksheet to determine how long you want to provide for specific needs and how much money is required for each item. Personally, I’ve never been a fan of “ten times your income” or some other silly blanket approach. Obviously, two people can have the same salary but have very different lives, needs and future plans. Additionally, you may already have fully funded college accounts, wedding accounts, have no debts to pay and an ample amount of savings stashed away that would take care of your family and your final expenses upon your death. In that case, insurance may not be needed.
So, which is best permanent or term? That’s for you to decide. Term does exactly what it sounds like: it covers you for a term of time such as 15, 20 or 30 years. If you die during the term, the death benefit pays out to your beneficiaries. If you live past the term, the premiums you’ve paid are kept by the insurance company UNLESS you have a “return of premium” rider on the policy for an additional cost. Permanent insurance is designed to guarantee the death benefit until you die. The guarantee can be structured to cover through age 100 or even age 121. With permanent insurance, your beneficiary is guaranteed to get the death benefit paid out to them as long as you keep up your end of the deal, which is paying scheduled premiums. The benefit of term insurance is that the annual premiums will be lower. The drawback is that it may never pay out. The benefit of permanent insurance is that if kept in force, it is guaranteed to pay out. The drawback is the annual premiums are more expensive. As I always say though, there is not an investment that I can offer that has the level of guarantee that permanent insurance does, for your entire life! Review an illustration that guarantees death benefit beyond life expectancy; in the policies I’ve placed, the beneficiary is guaranteed to get out of the policy far more than was paid into the policy. From a pure financial standpoint, the return on investment (the death benefit vs. the premiums paid) is way too significant to ignore.
If you want the financial plan for your family to succeed whether you live to see it through or whether you die prematurely, you owe it to yourself and to them to do a prudent analysis. There are two things in life that are certain: the younger and healthier you are, the cheaper your life insurance will be. I can guarantee you will not be younger than you are today, and chances are you may not be healthier. Second, it’s never a matter of IF you are going to die, it’s when. How have you prepared?
Guarantees are based on the claims paying ability of the issuing insurance company.
Riders are additional guarantee options that are available to a life insurance contract holder. While some riders are part of an existing contract, any others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing.
LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com. SchulferAndAssociates.com , louannschulfer.com or louann.biz
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
