It’s Just Smart Policy

Perhaps it’s time to start thinking about life insurance

In the immortal words of Ferris Bueller, “Life moves pretty fast. If you don’t stop to look around once in a while, you could miss it.” When it comes to thinking about death, let’s face it . . . we’d rather miss it. Gen X-ers — and even Millennials — are at the point in our lives at which marriage, 2.5 kids, and a goldendoodle are a reality. Adulthood is actually here for us.

This means that it’s actually time to sit down and think about what happens if you suddenly die. Yes, it’s depressing to think about. You know what’s more depressing? Not doing anything and leaving a tremendous burden to your family and your business partner (if you’ve got one) to deal with in your absence.

If you have people depending on you for financial support, you need to be prepared to give it, even if you’re not here anymore to do so. The easiest — and cheapest — way to do this is by purchasing life insurance. “Insurance is really important when you have dependents and obligations,” explains Susie Murray, Account Relationship Manager at BhealthE. Furthermore, it doesn’t need to be complicated or overwhelming or cost a lot of money. In fact, it’s far more stressful when there isn’t a policy in place. 

We asked Gary Wright, founder and President of BhealthE, for some basics to help get you started. You may think insurance sales people want everyone to buy insurance, but Gary is the first to explain that not everyone needs life insurance.

• When should you buy life insurance?  
  • If you’re a single 20-something and living debt free, you probably don’t “need” it. However, locking in the best rates is easy and may make sense since you are young and healthy. Another great reason to purchase life insurance at a young age is if you’ve co-signed a student loan with your parents. Some student loans have clauses in their contracts that may require the entire debt to be repaid in full upon death. 
  • Marriage certainly should prompt couples to have financial conversations about everything from debt management and investment strategies to budgets and spending habits. Don’t forget to discuss life insurance, especially if your expenses and current or future debts are dependent upon both incomes.
  • Do you have children? Then you need life insurance!
• What kind of life insurance should you buy? This depends on your goals and obligations. 
  • There are two types of life insurance: term and permanent. Basically, when you buy a life insurance policy, you can specify the amount that will be paid out if you die (“death benefit”). The payment you make to the insurer (“premium”) can be made monthly, quarterly, or annually. As long as you remain current with the premium payments, your insurer will pay your beneficiaries the death benefit upon your death.
    • Term life insurance is pretty much exactly what it sounds like. It’s a policy that protects you for a predetermined amount of time, typically 10, 20, or 30 years. If you die while the policy is in place, the death benefits will be paid. If you outlive the term of the policy, you’re no longer covered.
    • Permanent life insurance, which includes universal, variable, and whole, covers you throughout your entire life, with guaranteed death benefits paid upon your death. These policies have extra perks that allow these policies to act as a tax-deferred savings account where you earn a minimum guaranteed interest or annual dividend. Over time, the account builds in value, allowing you to borrow against it or use the income generated to pay the premiums. These added perks add significant cost to these types of insurance versus term.
• How much life insurance do I need? This is a subjective question and another reason to have a discussion with an insurance agent you can trust. They can answer your questions and guide you in the right direction. 
  • Do you need the coverage simply for funeral costs?
  • What about any outstanding medical expenses?
  • Do you want to pay off your mortgage?
  • Do you want to fund your children’s college education?
  • Have you thought about future wedding expenses?
  • Maybe you want to cover day-to-day expenses for your family for a certain period of time?

In sum, you must ask yourself the question: “What are my current and future debts that I want to cover in my absence?”

Though all of this can seem overwhelming, life insurance is a topic that we really need to discuss with our loved ones. Having an expert in the room to help with the process would certainly be beneficial to ensure you make the best policy decisions. Life insurance is one of the most responsible things you can do for your family and/or business. It can give you a feeling of great comfort and peace of mind knowing that everything will be taken care of if the unthinkable happens.