Fact or Fiction
Full disclaimer here… I am not a Financial Planner, Advisor or CPA please seek out the appropriate professionals as it relates to your individual situation. There has been some talk over the years and as of this day as it relates to Life Insurance, that there is still question and uncertainty of who should have it and who should not. I want to go over a few of the myths and dispel what some would actually still believe to be true. These are in no particular order although one could still could debate them.
One of the myths is “I’m single” “Why do I need insurance” “I have no dependents”. Now granted this may be true however what happens when you are no longer here? Who will take care of your final wishes and or expenses. I think it’s selfish for anyone to think like that. Your loved ones could possibly take on the burden. You don’t necessarily have to take out an astronomically large amount of coverage but there needs to be some consideration given. You should at least have a “WILL” or “POA” and notate what you would like for your final wishes.
The second one that I’ve heard is that my employer offers Twice my annual Salary. That’s it!!! Well that maybe fine if you never had any coverage at all to begin with. What happens when your obligations outweigh your annual salary. You should have a cost analysis completed to see exactly how much is needed in order to properly cover expenses.
Another one that goes along with my employer offering coverage is “I have coverage through the job”. Yes, some employers offer some sort of health and medical benefits as part of your employee package to include life insurance. Yet, consumers often believe that just because the job offers it that it is sufficient enough. Wrong!!! What happens when you no longer have that job. You may have an opportunity in some cases to have COBRA if it’s offered or it could be included in a severance package for a limited time. Remember, You do lose everything and now you are stuck until you find another job willing to offer you the same package or any benefit at all. Life Happens to us. It’s a good idea to consider having outside coverage.
I only need it
“Only the Breadwinner needs to be covered” Well let’s take a look and see how this plays out. Let’s say you are the Breadwinner and the significant other is the stay at home parent, taking care of the household, nurturing and raising the kids etc.. What happens if and when that person passes away? No one could hardly take the place of that individual. Now you have to figure out what to do next. Are you going to stop working and now do what your spouse has done? What type of standard of living will you now have? The household still has to be taken care of, Kids still have to be raised, fed and clothed. You may get help from family members but that may not always be the case. Perhaps you may have to hire a nanny to fill in the gaps or maybe taking out a policy on the spouse could greatly reduce the hardship if this should ever become the case.
What to do with the savings?
“Buy term and invest the difference”. Now we have all heard this line of thinking in the past from Insurance Agents to Financial Publications The potential issue with this strategy is that there is not enough follow-up and follow-through from either party to make sure that this is executed to align with the goals of the individual. An agent has found a way to potentially save you money on your current insurance coverage all the while setting you up with this idea that since we found some money let’s go ahead and invest it. The phrase mutual funds come up in this discussion albeit a bit complex but again with the right understanding and goals of the individual, there is opportunity there. As with any financial product seek out the professional that will have an unbiased approach about how to properly fund a life policy and other savings vehicle.
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