FAMILY UPDATE!
I'm about to turn 47, and I've noticed that my eyesight has gotten terrible in the past two years. It happened all of a sudden. I could see perfectly, and now I need reading glasses for everything. At Publix, I must ask young clerks to read the ingredients on the back of packages. I hope it gets better.Since we got our puppy, Penny, I am determined to get her to bond with me. Our other dog only loves my wife, so I hand-feed Penny, walk her, brush her, take her to the vet, clean up her messes, and keep a general eye on her.
I think it might be working, but my wife has an incredible magical power to get pets to like her. I have to be careful Penny doesn't cuddle with her too much. Sometimes, I have to step in and take her away.
When I say “life insurance salesman,” what image comes to mind? Probably nothing positive. I spent a short part of my career selling life insurance, and it was miserable. Why? Nobody wants to buy life insurance. The application process is difficult and complicated. Worse, the very concept of life insurance forces you to think about something most would rather not: your own death.
Once you get your life insurance, you never want to see your agent ever again. They are an unwelcome reminder of your mortality. When the agent does come around again, you probably won't see them. Because you are dead.
I greatly respect the sales warriors out there who tirelessly get people to insure their own lives. It is a thankless job, but incredibly important. Most people will never obtain it without getting nudged along, and the consequences could be devastating.
Whenever someone dies, it is deemed inappropriate to ask, “Did they have life insurance?” But for many people, the answer to this question could change the rest of their lives.
If a mother is at home raising three children, and her husband, making $90,000 a year, were to die, she is suddenly in a dire situation. I can’t emphasize this enough. She could go from a normal life to a life of abject poverty. She would have to start to work a couple of jobs. The kids will no longer have a mom present. It is a disaster.
Actually, let me stop right here for a very important public service announcement: If you have a child younger than twenty-one, you need life insurance on the life of both parents. Period. End of story. It is remarkably irresponsible to live without this safety net. If you have grandchildren, call their parents immediately and ensure they are protected.
If you are at home raising children, your death would put a financial strain on the household, as the children would need care going forward. You still need life insurance even if you are not making an income.
How much insurance do you need? If you die, life insurance needs to be able to replace your income, not just for one year, but for the foreseeable future.
If you make $50,000 a year, you need to get $1,000,000 of insurance. Why? Remember, it’s appropriate to withdraw 5 percent from your portfolio of stocks and bonds each year. So, if you make $50,000, you need $1,000,000 of insurance. If you pass away, your spouse or beneficiary can (and should!) take the million bucks, invest it, and take a yearly distribution of $50,000. It might seem like a big number, but it’s just simple math. We will talk soon about how remarkably inexpensive life insurance can be.
There are basically two kinds of life insurance. The kind that lasts forever and the kind that lasts for a limited term. The “lasts forever” kind is far more expensive. It has its uses, but it is usually reserved for a unique situation, such as having a grown special needs child, someone ultra-rich worrying about estate taxes, or a husband with a very young wife. With this kind of insurance, the insurance company knows that, at some point in time, they will have to pay up … unless you live forever.
The far more popular “term insurance” is, in my estimation, the right solution most of the time. Term insurance is simple.
For example:
$100,000 of 20-year Term Life Insurance means that if you die during the first 20 years, the company pays $100,000 tax-free. If you live longer, the policy ends.
This kind of insurance is far cheaper because, most of the time, the insurance company doesn’t have to pay anything. The term ends before you die.
To give you an idea of how inexpensive these policies are:
A healthy 25-year-old man can get a $1,000,000 policy for $40 per month for twenty years. (How could young parents not buy these policies?)
A healthy 30-year-old woman can get a $1,000,000 policy for twenty years for $30 per month (it’s cheaper because women live longer).
A 50-year-old man can get a $1,000,000 policy for twenty years for $200 monthly. The insurance company starts to get a little nervous that you will die during the twenty years.
A 70-year-old man can get a $1,000,000 policy for $2,000 per month for twenty years. Now, the company is terrified that you’ll die during the term.
Whenever you buy life insurance, you have to go through an underwriting process. This is where the insurance company checks you over. You must turn over medical records; someone will come to your house to take blood, urine, and other vital statistics.
These examples above all assume you are in good health. If you have pre-existing conditions, the price could double or triple. Smoking doubles the premium. In fact, many people can’t qualify at all. If you’ve had cancer, a heart attack, or a stroke, you might never be able to get insured.
The bottom line is this: If someone is financially dependent on you, you need life insurance. I know it's not fun to think about. Don't think about your death; think about your beneficiaries and their protection. Don’t make this more complicated than it is. Now go out and get those grandkids protected. Feel free to pass this on to the people who really need to see it.
Be Blessed,
Dave