The vast majority of people think life insurance is a smart money move-yet only 59 percent say they have coverage. How to go from well intentioned to well protected? These expert tips make the process a little easier to navigate.
Press Pause on Your Assumptions
With life insurance, sometimes the hardest part is getting started. “Research shows that many people think they won’t qualify or won’t be able to afford it, but that’s generally not true,” says James Scanlon, senior research director at LIMRA, an insurance research association in Windsor, Connecticut. In one survey, 86 percent of respondents said they hadn’t bought life insurance because it was too expensive-but many over-estimated the premiums by more than triple. The good news: Once you have a life insurance policy-unlike health insurance, which you might have to deal with every year– you could be hands-off for decades.
Think of the policy’s death benefit as a stand-in for your earning power: If you die, your loved ones will need enough to replace your income at least until they can make other financial adjustments. Run the numbers for yourself. Sites like Bankrate.com and Lifehappens.org (an education group formed by insurance-industry organizations) offer online calculators that will estimate how much insurance you’ll need to cover any immediate expenses associated with your death and minimize the financial impact on your family.
Pick a Type of Policy
There are two main kinds. Term life insurance covers you for a defined period, say 20 or 30 years, and is usually less expensive. Whole life insurance covers you for life and has an investment component. “Whole life can be a way to save for retirement or save for education, but for many people there are better ways of doing that, like funding your IRA or 529,” says Benjamin Sullivan, a certified financial planner at Palisades Hudson Financial Group in Austin, Texas. There’s no one right answer for every situation, adds Scanlon, but term policies are simple and provide the most coverage per premium dollar.
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Content: REAL SIMPLE, January 2018