Reasons to Buy Life Insurance
Life insurance is an indispensable and fundamental part of a sound financial plan. Over the years, life insurance offers peace of mind knowing that money would be available to protect your family and estate in a number of ways, including:
1. To Pay Final Expenses: The cost of a funeral and burial can easily run into the tens of thousands of dollars. Life insurance protects a spouse, parents, and/or children from suffering financially in addition to emotionally at the time of a loved ones death.
2. To Replace the Spouse’s Income: If a spouse were to pass away while the kids were young, the surviving partner would likely need to replace the income lost, which was essential to the family lifestyle. In many cases families overlook the stay-at-home spouse. In addition to taking care of young children, the surviving spouse may also need to hire help for domestic tasks that were once shared shared like cleaning the house, laundry, cooking, helping with schoolwork, and carting kids to doctor’s visits and sporting events.
3. To Pay Off Debts: Many families need insurance to cover debts like student loans, lines of credit and possibly the mortgage so they won’t have to sell the house to stay solvent.
4. To Cover Children’s Expenses: Most parents want to ensure their kids are well taken care of and can afford a quality college education. For this reason, additional coverage is absolutely essential while kids are still at home.
It is important to include discussions regarding life insurance with your Wealth Management professional to ensure you and your family are adequately covered for your specific life needs. You should start with a review of your current coverage and perform a cost review and gap analysis. Please contact a CGMA financial professional, as they are ready to help.
Why you should consider a third-party plan
1. Work Coverage is likely insufficient: While health insurance is a common employee benefit, it’s not unusual to get life insurance at work, too. The U.S. Bureau of Labor Statistics reports that three-quarters of full-time civilian workers are offered life insurance by their employers. The overwhelming majority of them take advantage of the benefit. However, that work coverage usually isn’t adequate. Most employers give employees coverage equal to one to two times their annual salaries. While this might be enough for someone who is single with no dependents, if you have a mortgage, young children or a nonworking spouse, you’ll need more than that. A common rule of thumb is that life insurance should provide seven to 10 times the insured person’s annual salary. But that’s just a starting point. From there, you need to get a full financial picture so you can dial in the right amount of coverage. You need to consider variety of factors, including a income, assets, liabilities and — perhaps most difficult to predict — plans for the future, such as for having additional children, or for retirement.
2. More affordable than you might think: If you think you can’t afford life insurance, you might be wrong. A study from LIMRA and the nonprofit insurance education group Life Happens found that 80 percent of consumers have the wrong idea about what life insurance costs. Millennials, for example, believe life insurance policies are more than three times more expensive than they actually are. In fact, premiums for life insurance are typically lower than for other forms of insurance and are often less expensive than monthly bills for cable or cellphones. A large majority of term policies written have premiums of under $100 per month, and for some people it’s even possible to buy adequate coverage for under $50 a month. Of course, the prices do vary based on age, gender and health factors.
3. Waiting WILL COST YOU: While it’s easy to put off buying life insurance, the longer you wait, the more you’ll spend. Up until age 40, coverage only goes up by a little bit every year, but once you hit 40, the increases become more noticeable, and by 50 they become even more pronounced.
