Wednesday, February 24, 2010

Life Insurance

Life Insurance is an afterthought for many. It was different for me.

Originally, when I was getting married, I contacted my agent to purchase a policy. My reasoning was simple: I was about be married to my beautiful bride and she may get pregnant. If so, that child is mine and I must still provide for him or her even if something happened to me. She could get pregnant and I could die not even knowing she was a few weeks along.

I am not sure why that occurred to me then, but I have been told before I think a little differently sometimes.

When I explained all this to my agent, he said "If everyone thought like you, I'd be rich!"

At any rate, 15 1/2 years later I have bought more insurance to protect my wife and the kids if I am the first to go see Jesus.

Generally, I strongly prefer TERM insurance. Only under unusual circumstances would I recommend whole life or one of its progeny.

Term is usually so cheap, it is a good buy. I strongly recommend its purchase while you are healthy enough to buy it cheap. A good rule of thumb on amount might be:
With all your debts paid off, could they live well on 5% annualized.

So, with a paid for house, and no notes, $500,000 policy may throw off 40 to 50K per year. Most people can sustain a nice lifestyle without debt and that income, plus any possible earnings. However, for a little more per month, a 1,000,000 is even more preferable. A goal is to allow your survivors to supplement their live though interest without touching the principal.

It can only be bought cheaply when you are young and healthy. So this is the time to think about it. And, be honest on the application, or they will deny your coverage, even after you die in some cases.