I love cheap term life insurance . But I hate it when people get ripped off, buy the wrong kind of insurance or don’t think they need term life insurance at all.
Some people turn to guaranteed issue policies to get low cost coverage, but this is a terrible idea. As I’ve written about before, guaranteed issue life is really very expensive. Also, your family may not even collect if you die within the first few years of buying the policy. This is the junk they sell on late night television and hock as final expense policies. Rather than buy this schlock, look into getting a term life insurance policy if possible.
I am also a huge opponent of universal, whole life and variable life insurance. Because there is an investment element in this policy, some salespeople try to tell you it’s actually very cheap. They say that the investments pay for the coverage. That’s a big, fat lie. Don’t fall for it. Unless you have an estate tax issue, permanent life insurance is a raw deal in most cases.
In the 25 years I’ve spent advising people about money, I have never once seen any client benefit by owning this kind of insurance. The fees and costs eat up the “investment” element and the policies self-destruct just when you need them most.
Not Having Enough
While scrimping on coverage may save you money in the short-run, it kind of defeats the purpose of having any coverage at all. Here’s what I mean.
Let’s say your goal is to protect your family in case you die prematurely. You calculate that you need $2,000,000 in term life insurance for the next 20 years in order to safeguard against that risk.
Fast forward 10 years.
You are 10 years older and you find you haven’t made the best investments for retirement. Because you figure you are going to work 10 years longer than you previously thought, you might need that coverage to last another 20 years and not just another 10.
It will cost you more to replace the policy you currently have, but it will cost your family a heck of a lot more if you don’t replace the policy now and then die in year 11.
Lots of people have been hurt financially over the last 10 years. If that describes you, I strongly recommend reviewing your current coverage. Even if it was enough when you bought it, it may not be sufficient to do the job now. Your needs may have changed. Get quotes. The sooner you do this the better. The cost increase from age 30 to 40 is much smaller than the increase from age 40 to 50. Either way, it’s easy to find discounted term life insurance.
Have you reviewed your life insurance needs recently? What conclusion did you come to?
OK…enough talk about life insurance.
Let’s broaden the discussion by looking at the Pilgrim Parade of Posts for the week:
Financial Highway, Working From Home, Paying for Childcare
Doug, Will You Pay Taxes on Social Security?
Green Panda, Keep Your Credit Score Solid in College
Len Penzo, Lessons From My Italian Father on Money and Marriage
The Digerati Life, Tax Efficient Investing
The Oblivious Investor, Do you have an investment backup plan?
Carnival of Wealth
Carnival of Personal Finance