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The definition of insurance is protection against loss! I have found that probably 80% of the people I see are underinsured. The reason is that most agents from the major companies promote permanent insurance. For the last 22 years Ridinger Financial Services has advised clients of the advantages of term life insurance (we have been in business over 25 years, but it took that long for me to see the light). The reason is most financial planning forums will tell you there are 3 reasons people buy life insurance.
- Paying off debt
- Protecting lost income (rule of thumb, 8 to 10 times your income)
- Provide for college costs.
For example if you have a husband and wife (both 35 years old) with 2 children. Each parent is earning $40,000. Your home mortgage and various loans equal $200,000. They want to provide $15,000 toward college for their children.
The amount of coverage you would need on husband and wife would be $640,000. This is arrived at adding the debt {$200,000, plus (8Xincome) $320,000 plus$120,000 (college costs for 2) = $640,000}. With 2 income families you can see this is important to have on both husband and wife.
With the new 30 year term products a young family can lock in their rates for 30 years and protect their family. With the new RETURN OF PREMIUM products you can get all your money back as well.
In our example above for a little over $100 a month* these families can lock in their families security for 30 years. If they add a few dollars more a month they can get all their money back with Return of Premium. If they bought whole life insurance (as most agents sell) the premiums could be as high as 10X as much!!! Most people cannot afford those types of premiums.
The last reason (4) is the most important reason people buy term insurance. They must care about someone. Life insurance is the most UNSELFISH gift one can give their family. It is the legacy to pay off that mortgage, or provide that college fund when you are no longer on this earth. It is the difference between a family making it or not! I will never forget one widow telling me when I delivered her check for $200,000. Her husband had purchased it 3 years earlier to cover their mortgage on their small farm. She told me it was her “sad” money. But she quickly said it would be sadder if it wasn’t there. Money can’t replace anyone, but it sure helps those we love when we are no longer there.
I hope now you can see why we advise term life insurance for most of our clients! It does the job right!
*These costs are a 30 yr term for male and female for $640,000 with AIG preferred plus non smoker category
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