Talking Term Life Insurance

If you have a family, life insurance is essential, and term insurance is the best kind. But what’s the best way to buy it? We’ll talk about that today on MoneyWise. Okay, it seems like we get a question about life insurance almost every day. Do I need it? Or, Should I get term or whole life? So let's clear those up first. DO YOU NEED LIFE INSURANCE? If you have a family that depends on your income, you need life insurance. If you’re a stay-at-home spouse caring for children, you too need life insurance, primarily because child care is expensive. Now, we almost always tell folks to choose term over whole life policies because term is pure insurance. It doesn’t muddy up things with a savings component, and it’s far cheaper. So you want term insurance, but there are several ways you can go about getting it. And we should mention that whichever way you buy it, you always want to choose a company that has an A++ rating and you can check out insurers at AMbest.com. HOW TO BUY TERM INSURANCE So how should you buy term insurance? First, you can get it directly from an insurance company. This is for folks who like to deal with an older, established insurer, and most of the big name insurance companies would fit into this category. Many of these companies have been around for more than a century and have great stability. When you buy through them, you’ll probably have to deal with an agent on the phone who’ll take you through the process. Another way would be to use a comparison site. This is good if you want to price shop in a hurry. I won't name any of these web sites, but you probably hear ads for them all the time. These actually aren’t insurance companies themselves. Instead, they gather price quotes from several different insurers as a convenience for you. Then, when you choose a policy, you actually buy it from the company that offers it. This way can save you a lot of time because you only have to enter your information one time instead of having to do it for each company as you shop around for quotes. But keep in mind that these comparison sites often deal with only a select group of insurers that pay them a commission. So it’s possible to miss the very best quote if the site you're using doesn’t have an agreement with that company. You can also buy a policy through a new company that's associated with one of the bigger, legacy insurance companies. These upstart insurers have the stability of the older companies that back them financially, but they exist largely in the digital realm. They’re for folks who don’t want the hassle of talking to an agent and would rather apply for a policy online. So if you find a great quote online from a fairly new company that you may not have heard of before, check to see if it’s backed by one of the traditional insurers. If it is, you get that measure of reliability while still working completely online. ONE MORE WAY TO BUY TERM Now, there’s one more way to buy term life insurance, and this is really about the type of insurance you’re getting. You have a choice between what’s called simplified term and instant issue. As the name implies, instant issue is for folks who want life insurance without having to get a medical exam. You can usually apply online and get an answer right away. Several smaller companies specialize in instant issue policies but several of the larger, legacy insurers also offer them. They’re great for people with pre-existing conditions who want access to life insurance. But they come with a few catches. The death benefit with an instant issue policy tends to be smaller. Also, the term is likely to be shorter, and finally, it probably will cost more than a regular term policy that includes a medical exam. HOW MUCH DO YOU NEED? Now, you might be wondering just how much life insurance you need. A good rule of thumb is 12 to 15 times your annual salary. For a non-working spouse taking care of children at home, the rule of thumb is 5 to 10 times your annual expenses. And one final thought. Another question we sometimes get is whether life insurance (or any insurance for that matter) is biblical. Or does it mean that you’re not trusting God to provide? To be sure, God will provide. He promises to provide, and He is always faithful. But we are called to be stewards, and taking care of your family is certainly good stewardship. 1 Timothy 5:8 reads, But if anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever. Unless you’re independently wealthy and don’t need to work, you need life insurance to provide for your family should something happen to you. I hope that puts your questions to rest. On today’s program, Rob also answers listener questions: ● Is there a way to quantify the financial benefits that a company offers to employees? Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to [email protected]. Also, visit our website at MoneyWise.org where you can connect with a MoneyWise Coach, join the MoneyWise Community, and even download the free MoneyWise app. To support this ministry financially, visit: https://www.oneplace.com/donate/1085/29