People always ask me, Cliff, why should I buy Term insurance over Whole or Universal Life Insurance? In short, cost. Term Life Insurance is the least expensive way to insure your family.
As a life insurance broker, we would love to sell you an expensive Universal or Whole Life policy, but the truth is, this is not the best fit for most people. Most of my client's tell me they are usually planning around life events. "I only need this insurance until my house is paid off....Until I am ready to retire....I want to make sure my children have money for college." This is exactly what term insurance was designed to do. Term Insurance should be viewed as a vehicle to get you from point A to point B.
What do I need to know before I buy Term Life Insurance? The "Term" and "Face Amount".
What is a "Term" and how do I decide what term I need? The term is the period of time your life insurance is guaranteed to stay the same price. An example, Bob is 44 and is 10 years into his 30 year mortgage. Bob wants to make sure if something happens to him, his wife and children can keep the house and pay off the mortgage. In this case Bob should buy a 20 year term to protect his family. This way if something happens to Bob before his house is paid off the life insurance policy will be in place to provide Bob's family the money to pay off the mortgage.
What is the "Face Amount"? The face amount is the amount of money that will be paid out to your family of beneficiary if you pass away. How do I select a face amount? In Bob's case, Bob should select a face amount that is equal to his mortgage. If Bob owes $250,000 or his mortgage Bob should select a "Face Amount" for $250,000.
What if I need more than the mortgage paid off? There is a simple formula for this as well. An easy needs analysis will help us determine the right amount for you.
No comments:
Post a Comment