Life Insurance

Ok, we’ve been putting this off. For a while. If you’re starting out in life, early 20s, keep reading. And if you’re older and have also been putting this off for some time, keep reading. Life insurance and the lack there of it is a nasty road to embark on. Like health insurance, it’s a good thing to have for several reasons. Here we’ll take a look …

Family, family, family

If you have a family, odds are you care about them. The average U.S. family holds debt in the $130,000 range. If you kicked the bucket tomorrow, how would they pay that off? A disturbing question, especially if you have young kids. With a term life insurance policy, you can ensure what’s known as replacement income which will give your beneficiaries a fixed stipend. This type of policy is a lump-sum payment that would be paid out to the beneficiary(s) upon the death of the policyholder. For example, if you, the insured person, plans on leaving $700,000 to the family, then family members will receive the same amount when you pass.

Mortgage

If you have a mortgage, keep reading. For most of us, the mortgage is the biggest monthly expense. If you meet an untimely demise tomorrow, who is going to pay that off? Mortgage life insurance is a niche option that will pay off your mortgage if you pass away while the mortgage is still in debt. In other words, while you still owe money to the bank.

In this instance, the mortgage company, not your family or friends, are named the beneficiaries. A word of caution, this should not be your sole life insurance plan, but rather an integral complement should you owe a considerable loan amount on a piece of property.

Small Business Owner

As a small business owner, you’re under the gun. It’s rough running your own business and you’re likely working extra hours to do it. But, should you pass, whatever debt you have associated with said business is then passed on to your partners or even employees. With key person insurance, the coverage relates to the primary folks involved in the day-to-day business. Regarding a small business, this would be owner and/or co-founders, but also key employees. If you pass and key person insurance is in place, the business stands a great shot at surviving as outstanding debt will be covered.

A New Job

How exciting, a new gig, fresh beginnings, no more creeps from Floor 3 cramping your style. Another great perk of starting a new job is employer-sponsored benefits. In the U.S., many companies offer employer-sponsored life insurance, commonly referred to as group life insurance. The positives – it’s cheap and easy to qualify for. The negative – coverage is spotty.

To flesh out what the best option is for you, utilize the DIME method – debt, income, mortgage and education. Add them up and when doing so the thought process is how much debt you have, plus annual income, the total owed on the mortgage and what the kid’s education will cost assuming a 4-year degree. Odds are the group plan will be significantly less, but again, a nice complement to the whole pie.

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