All right, we are all freaking out about a global pandemic and the potential financial chaos that could follow. Here is one critical financial-planning item within your control that’s also inexpensive and easy to obtain: term life insurance.
Chances are you can buy a policy without ever leaving your home. Everyone knows deep down they need life insurance, but many households don’t have a policy in place. Some have it, such as an employer policy, but it’s not enough.
With a term policy, you pay an annual premium (you can also make quarterly payments) for a set period. That’s what “term” refers to. With a “level term” policy, the annual premium will never change. If you die during the “term,” your beneficiary collects the death benefit of your policy.
If what’s holding you back is more emotional — you just don’t want to think about your mortality — consider an even harder scenario: You don’t take care of this, and something does happen, leaving your loved ones financially vulnerable.
Here’s how to provide financial peace of mind for anyone who is dependent on your income. (If there is a stay-at-home parent, that person should have a policy as well; consider the cost of hiring people to provide the caregiving that the parent now provides.)
Decide how long you need insurance. There are two types of life insurance: term life and a variety of “permanent” policies. Insurance agents love to sell permanent policies because they come with much bigger premiums that earn agents much bigger commissions. But most of us need only term life insurance to provide this “what if” protection for a set period, not permanently.
If you have young kids, you might want a policy for 20 years to make sure there would be ample income to raise them and educate them if something were to happen to you. Or if you are younger and have yet to build up your retirement savings, a 20- or 30-year policy would provide a financial cushion. Term is all you need.
There are online worksheets to help you estimate how big a death benefit makes sense. Try lifehappens.org.
In 30 seconds, you can get a ballpark estimate of premium costs at Termforsale.com
A policy that will pay out $1 million in the event the insured dies in the next 20 years might run a healthy 35-year-old nonsmoker $30 to $40 a month. At 45 years old the cost might run about $80 to $100 a month.
Even if you’re 55 and in good health, a policy that will pay out $1 million if you were to die in the next 20 years might run $200 to $250 a month.