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Consider Yourself When Buying Life Insurance

 

At least life insurance isn’t nearly as hot a topic as health insurance, and there’s no great debate on whether to nationalize it. But that doesn’t mean there isn’t a debate over whether term or life is better. For example, radio host and financial planner David Ramsey ardently opposes permanent plans, calling on families to focus on investing and paying off your debt instead.  Term life opponents like Ramsey argue that if you pay off your house and have plenty of other assets saved up, you shouldn’t even have to worry about life insurance at all.

 

Others argue that term life is merely a “death insurance,” and that it doesn’t build equity over the long run.  There’s one other factor in the equation that you don’t hear in the debate: each customer is different, and each customer has vastly different needs and different beliefs. So as you consider the type of policy you should purchase, consider your own beliefs -- do you view life insurance as a hybrid between insurance and investing, or as merely a way to keep your family safe?  Let’s consider the different types of families and individuals, and figure out which one you may fit in best.

 

Good Income, Solid Planner

If you’re young, have a solid career path and good income -- in the minority, in other words -- you should plan for something that will pay solid dividends in the long run. You should probably look into a solid universal or whole life insurance. These policies are permanent, and pay solid dividends if you don’t draw from them for decades.

 

Some insurance salesmen say whole or universal life are the better options, but they add one caveat: many customers aren’t disciplined enough to continue to pay the high monthly premiums.  And when children start coming, so does the cost of diapers, health care and extra food and clothes. So make sure you factor those costs in while budgeting for life insurance.

 

Small Budget, but Solid Planner

Some people want to plan for the family with a good whole or universal life insurance policy, but they have a small income and just can’t afford those monthly $100 or even $200 premiums.  There’s an option for those families, as well: convertible term.

Coverage for a healthy couple in their mid-20s can be about $40 a month, and you can have the option to upgrade later. The advantage to this type of policy is that even if you get cancer or some sort of disease, you still pay an amount that reflects someone who never contracted the disease. You will, however, have to pay an additional amount based on your age when you choose to convert it.

 

Small Budget, Doesn’t View Insurance as Investment

If all you want is something to insure you while you have a hefty mortgage payment and children, then go for the cheapest thing and purchase term.  Make sure you spend the money that you would otherwise spend in a permanent insurance policy in investments.  For example, if you purchase a term life policy that comes with $30-a-month payments as opposed to a whole life policy with $120 monthly payments, put the extra money in the principal of your house or in some form of liquid asset.

 

The Undisciplined

Unfortunately, if you’re completely undisciplined and you don’t live within your means, no option is really good for you. The reality of life insurance, whether you pay for term or whole life, is that you must continue to make monthly payments.

Regardless of what type of policy you purchase, you need to be able to pay for it every month -- whether it be $10 or $200. Don’t waste your money to pay for even a few premiums if you won’t pay it in the long run.

 

Conclusion

There are so many types of families and so many different situations that it’s hard to pinpoint your specific needs. Review your budget, consider your long term goals, and talk it over with your spouse. After reviewing your budget, visit State Farm Insurance’s Web site, which has a calculator of how much you can afford based on your income needs and house payment.

 

After spending some time crunching numbers and reviewing what type of discipline status you have, be ready to buy.  Salesmen aren’t always right about everything, but they are right when they say that the longer you wait, the more expensive the premium will be because of your age. We can help you find the right life insurance quote right now. Just enter your zip code in the box at the top of this page and click "Go" to get started.

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