Term Life Insurance-Term Life Insurance Rates

William:

Yahoo Personal Finance explains this very well.

Bright Future Penguin:

Hi, great question. I read the answer from the person claiming to be a financial advisor. There is some good information there, and also a lot of bias against life insurance agents. I’ll make it simple. I was a life insurance agent for a few years. Yes, there are good and bad life insurance agents. There are also good and bad financial advisors, and good and bad mailmen, and good and bad in every profession. Don’t just assume everyone is out to get you.

There are four major classes of life insurance, from least costly to most:
Term
Universal
Variable
Whole

Each has its place. The financial advisor guy seems to think they don’t. He’s wrong. Each one does. Your situation only merits the least costly one, which is TERM insurance. All three of the other forms are inappropriate and too costly for the situation you described. Don’t worry about what the agent says, or the financial advisor in the message below says, just rely on common sense and know that you should not over pay.

Term insurance works like this:
You buy it. It lasts for a specific length of time you choose when you buy it. If your husband passes away during that time period, the beneficiaries listed in the policy receive money. If he outlives the policy’s duration, you get nothing unless you extend it. It’s almost never worth it to extend it because the cost is ridiculously high.

To get the best deal, find a life insurance BROKER, who can shop many companies for you. Different companies are “friendlier” towards different health concerns than others. When I was in the industry I found Banner Life and West Coast Life to be pretty friendly and to have pretty low premium rates.

You’ll want regular blood pressure readings lower than 132 over 80 when he gets it checked if you are worried about blood pressure. Make sure when he goes to the doctor that they use the large cuff on him. Have him sit in a chair with both feet flat on the floor when they take the reading and wait at least 5-10 minutes after arriving in the examination room before they take it. If he’s not in great shape, you’d be surprised how many points just walking to the exam room can artificially inflate the BP score above a resting BP score. Don’t let them give him the test while sitting on an exam table with his feet dangling in the air.

As to the amount of insurance to buy, well, by going with TERM you can buy more face value of insurance (meaning more money if he passes away) for less cost than with any other form. Don’t short change yourselves. You’ll hear a lot of well intentioned people tell you to go for 5 times the deceased’s annual income. These people are wrong.

The real goal of life insurance on a bread winner is not to make the survivors rich. It’s also not to leave them poor. Ideally it’s to let them continue their lives with no financial crash while already dealing with the loss of a loved one, and have their ongoing financial lives essentially unaffected.

To do that you want an amount of insurance that will do these three things:
Leave the family debt free (including covering funeral costs)
Set up college funds for kids in the household (if that’s a family goal)
Continue the deceased’s income on an ongoing basis.

5 Time income will continue the income for 5 years and then leave a family penniless unless the surviving spouse is a substantial breadwinner. The real truth is that you should total up all debts. Add funeral cost. Project college costs if that is a goal (you can find college cost estimators online all over the place) and add that (that number might shock you). And finally add the biggest amount, the income continuation bit.

To do that you need a lump sum you can stick in some investment vehicle that will spew out income each year equal to the deceased’s income without touching the principle. A good investment advisor can probably find you a 5% return vehicle that is pretty stable. If you can get one, you need TWENTY times the deceased’s salary to continue it on an ongoing basis.

For example, if your spouse’s annual income is $5, and the investment you are using to replace it is a savings account earning 5% interest, you need $100 in the account to have it produce $5 a year for you.

Add that to the other items (debt, funeral, college) and you have your total. THAT is your starting point, and it’s a LOT higher than most people have. Reduce it by whatever amount you can replace with existing savings, existing insurance, social security benefits, etc. You’ll arrive at your final amount of insurance, which is still more than most folks have.

If you cannot afford that amount, get as close to it as you can reasonably afford. Do NOT bankrupt yourself to buy life insurance. Don’t cheat your family out of the benefits they should have either, though.

Contrary to what the other guy said, it’s NOT car insurance. You get a dented fender and discover you didn’t have the right car insurance, you can get the right insurance late