In the 2014 Insurance Barometer Study, nearly 60 percent of those surveyed noted they haven’t bought life insurance yet because they have other financial priorities. Most of that group put expenses like cable TV or cell phones ahead of buying life insurance.
Yet this type of insurance can be a crucial part of any financial plan, says Ryan Shaughnessy, LUTCF®, CLTC, an LPL Financial Advisor with SAC FCU Wealth Management.
“Life insurance is a love language,” he says. “It’s not for you, it’s for the people you love. Life doesn’t always go according to plan, so it’s important to think about those ‘what-if’ situations and make sure insurance coverage is part of your financial plan.”
Life insurance basics
There are two major types of insurance, Shaughnessy notes, and you can think of it in terms of renting or owning. With term insurance, similar to renting, you choose a specified amount of time for the policy, from five years to 30 years. Inexpensive and often offered as an employee benefit, these policies tend to be the most popular.
Permanent insurance provides lifelong protection and tends to cost more. This type of insurance accumulates cash value and can be a source for loans and withdrawals, if necessary. There are two main categories in this type of coverage:
- Whole life offers fixed premiums with consistent, guaranteed returns and a conservative investment strategy
- Variable offers more flexibility in choosing investment opportunities for the fixed premiums
Often, people use a combination of term and permanent insurance, depending on their specific circumstances.
Which policy should you buy?
Shaughnessy suggests visiting Life Happens, a nonprofit site that includes “Insurance 101″ information, calculators, and helpful videos. An interactive product selector can walk you through questions to consider when determining what type of life insurance is best for you.
No matter which type of policy you choose, the time to act is now. The younger you are, the easier it will be to obtain insurance, because you must be in fairly good health to get coverage. Shaughnessy notes, “You can’t buy homeowners insurance when your house is on fire. Similarly, you can’t get life insurance if you have a serious illness. But the good news is that once insurance companies approve you, they can never cancel the contract, even if you do become ill.”
During September, in honor of Life Insurance Awareness Month, take some time to find out about your options, and make life insurance part of your financial planning.
How are you planning for your family’s financial future? Share your thoughts in the comments.
Learn more about life insurance, and which policies might be a fit for you, by setting up a free consultation with a SAC FCU advisor.