You might see this as heresy from a guy whose parent company is part of the MetLife enterprise. But here goes...
Life insurance costs have recently climbed after falling for more than a decade.
But remember, life insurance doesn’t benefit the person that dies. It benefits the family left behind and there are prime areas in your life that make it a valuable investment.
The most helpful life insurance policy is for a family income earner that is currently raising a family. If there are young children that are not able to support themselves you should have a life insurance policy. Today, it is more common for both parents to work to earn enough to survive. If you can’t make it on one income you definitely need to have a life insurance policy. If you both are income earners then both should have a life insurance policy.
Many assume that because they have group life insurance coverage at work, they're set. Unfortunately most group policies woefully under insure.
There are dozens of internet-based life insurance calculators available on-line. Find one and plug in the data.
You can stop having a life insurance policy is when your spouse and children are able to take care of themselves and when you have your home paid off. Life insurance should benefit the family to help them stay afloat when the finances dramatically go down.
The ideal amount to spend on life insurance is zero. That’s because the probability math built into underwriting is pretty much the same math casinos use. Some customers win (i.e. die and beneficiaries collect the death benefit), but the average customer loses (i.e. outlives the policy and does not collect the death benefit).
The purpose of insurance is to turn the unknowable (the probability of financial disaster brought on by your death) into the known (the cost of premiums today).
Buy only enough insurance so that your loved ones don’t suffer financially. Buy only cheap term insurance, not expensive whole life or anything else that builds investment value, because you can build investment value in your brokerage account with more control and lower fees.
Pay for insurance only until your family situation no longer requires it. The more you pay, the longer you can lock in prices, up to 30 years.
Now obviously, every person's situation is different and there are times where a Permanent Life Insurance policy is appropriate. Similarly, some people see life insurance as a means of bequeathing a legacy where otherwise they would not have assets to bequeath. But for the vast majority of people the "simpler is better" solution would work just fine.
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