When I Realized I Needed Life Insurance and Some Helpful Tips
There are a lot of key moments in life. When you met that special person and know that she’s the one. When you actually ask her to start her life with you. When you buy your first home.
Then there’s the first time you realize that you need life insurance. For me, and many others, it comes with holding their first child in their hands. That’s a hectic time and there’s not much sleep to be had, but that doesn’t make life insurance any less important.
With that in mind, here are some things about getting life insurance:
Know Which Type to Shop For
There are two basic types of life insurance, whole and term. Whole life you keep forever (as long as you continue to pay the premiums). Term life is for a specific amount of time. Typically, that’s 20 years. In my situation, I wanted to make sure we had enough money to cover the kids through high school and into college. The twenty year option seemed like the perfect fit. After that, the wife can support herself with our retirement savings and social security.
Since term life insurance is a lot cheaper than whole life insurance, I’ll be able to invest the difference, grow my retirement fund, and maybe self-insure my family in 20 years.
Know How Much to Get
Most likely the salesperson is going to try to push you to buy more insurance than you need. It makes sense, might as well get as much from the fish that’s already been hooked. They may try to steer you towards extras that give them higher margins. Just stay away.
How much life insurance do you need? It’s a complicated question and you’ll have to do a fair amount of financial analysis to get a good number. One of the biggest things to consider is replacing your income. Retirement planners use a guideline of 4% your nest egg to calculate your replacement income. That would mean carrying 25x your current salary. If you already have savings, you can expect your wife to be able to work a little, a more realistic goal may be between 10-15x your current salary.
Take the Time to Shop Around
I remember calling many places and filling out a ton of online forms. I took the approach that I take with getting contractors. Get several bids and see who comes back with the right price. There are tons of places that sell life insurance (such as GIO life insurance), so the more quotes the better. The best price isn’t always the best deal, but it will help give you a very good idea of what you should be looking to pay.
Feel Free to Negotiate
If there’s a company you already do business with and you know and trust them, ask them if they can match some of your low prices. Tell them that you really like to give them your business and they’ve earned your business with their great service in the past. In never hurts to butter them up.
Whatever you do, the most important thing is to have something planned. It’s the first, and most important step to securing the future of those you love.