I am interested in purchasing life insurance, but lack general knowledge of the industry?

Question

What kind of life insurance would be best suited for a 26 year old in good health who is the sole income in the family? Keep in mind that I support a stay at home husband, and have 3 children. No assests and no debt. Thanks.

Answer 1

Hi,

I am a licensed agent. I would strongly suggest you talk with a licensed agent, who works with A+ companies. Good for you!

Answer 2

I'm a financial representative and providing life insurance is one of the things I do for clients. God forbids if the breadwinner dies, where would the family be without life insurance? Life insurance can't protect you against harm or death, but it can replace your income. The problem is that many families that own life insurance don't have adequate coverage, but they pay lots of premiums for it. That's because they own the wrong type of life insurance. Take a look at the facts and you decide which product is the best:

Whole life insurance

1) Its level term to around age 100 that builds cash value.

2) Since it builds cash value, premiums are higher than term insurance that doesn't build cash value.

3) There is no cash value growth in the first 2 years because premiums are used to pay for the insurance and commissions to the agent.

4) After first 2 years, you are guarantee a rate of anywhere between 1-4% (varies between companies)

5) If you wish to take money out from the cash value, you have to borrow it and pay loan interest of 6% to 8%.

6) If you die someday, the insurance company keeps your cash value, but pays the death benefit. Death benefit will be reduced by any loans you taken from the cash value.

Universal life insurance

1) Annual renewable term until around the age of 100 that builds cash value.

2) Flexible premiums as long as there's enough cash value to pay for the insurance.

3) While premiums may remain level in the beginning, the internal cost of the insurance goes up every year. That means less and less of your premiums goes into the cash value. Eventually, the premiums you pay will be insufficient in the future to pay for the cost. What would happen is that you would either have to pay more premiums or a portion of your cash value will be used to pay for it.

4) Same cash value features as whole life.

Term insurance

1) Various of level term products to choose from (from 1 year to 35 years).

2) It does not build cash value, so premiums are initially lower than whole life and universal life.

3) Most term insurance are guaranteed renewable without providing a proof of insurability. If your health was to decline because of old age, you can renew your policy without any hassle.

4) When you renew, premiums will be based on your current age. So premiums will go up after the initial level term.

Those are the facts.

Personally, I have sold term insurance 100% of the time. Why? Its because my clients can get lots of coverage for low amount of premiums. Since premiums are low, I help setup investment accounts for my clients so that they can build wealth. If you had lots of money saved right now, would you still need life insurance? Probably not. But you probably don't have lots of money saved right now and if something were to happen to you, would your family be financially ok? As you get older and continue to invest, you may or may not need life insurance when it is time to renew the term insurance. If you were to invest $200/month for the next 30 years and the average rate of return in your portfolio was 12%, you would have about $650k saved for retirement. That's probably not enough to live on, but at least its better than having money sitting in a life insurance policy.

Which brings me to the next point. It pays to start saving early. The later you wait, the more you would have to put away to reach your retirement goal.

Answer 3

The purpose of life insurance is to insulate a family from the financial burdens that accompany the premature death of a breadwinner. The death benefit of a life insurance policy should replace the breadwinner’s income for a reasonable period of time, so the family adjust to the loss. Some experts say that period is 5 to 7 years, others say seven to ten. For example, if you make $50,000 a year, then you would want a death benefit between $250,000 and $500,000.

Answer 4

Go to Yahoo Finance, click on "Personal Finance" and read the life insurance section.

You DO need life insurance protection (or more accurately, your family needs it).

Answer 5

Life insurance is stupid for someone who is young and healthy.

Answer 6

As a general rule the earlier you take out life cover the better. The reason is you are healthy and insurance is much easier to apply for.

The level of cover all depends on your individual circumstances but about 8-12 times your salary for Death is about right. there are many tools on the web that will help you determine the right amount. This gives your family enough income if you die. i would also add the cost of purchasing a home if you can afford the extra premium.

Protecting your income is as important as covering your death. i call it the living dead.

In Australia we have Income Protection which provides your income up to 75% of your current salary and Permanent Disability and Trauma insurance.

I am not sure if these types are available in other countries.

Here is a link to my web site that explains the types in Australia if you are interested.

http://www.completecover.com.au/products...

We don't have Whole of Life in Australia but we do have Level and Stepped premiums. Level starts off higher but stays the same and Stepped increases with age. I suspect it is Whole of Life and term comparisons.

As a general rule, if you think you will need the insurance for more than 10 years starting with Level is better in the long run. If the policy is for a shorter term then Stepped is better.

Again it all depends on your situation and budget.

One thing to remember is that if you work out what you need and can't afford it don't walk away. Work out what you can afford and buy that amount of cover. Something is better than nothing.

I hope this helps.

Answer 7

When you are young and healthy and have a family to support and raise, I feel whole life with term is also a good policy.  Whole life is more expensive than term, and many people say to purchase the term and take the difference and save it, but no one ever does that.  The whole life premium is stable for your life, where the term is stable for only 5 or 10 yrs., or whatever.  There is 10 yr term, 15 yr term, etc.  BUT after those years are over, and you need more insurance, the premiums are higher since you are older and more than likely have health issues.  It can get expensive over time, where your whole life stays the same til you die.  That is my personal feeling and I was in the insurance business for 30 years.  I saw people who turned 65, their term insurance was ending and their new term for 5 or 10yr term was very high and they could not afford it.  A good agent will do an illustration for you.  Look at the premium amount around age 50 and older, and compare. Also many people do not have that much income coming in at age 65.  Buy it when you are younger and healthier and have the money.  Hope this was not too confusing!

Answer 8

First, you need to determine how much life insurance you need. Example: Final expenses, Childrens education, Emergency fund, Rent or Mortgage, Debts if any, Income for surviving spouse and children.

A good rule of thumb is 8-10 times your annual income.

It also depends on the amount of premium you can set aside for the coverage.

I would go with a Whole Life policy and Term combination. Also, you might think of purchasing Disability Income insurance to pay you if you get sick or injured and can't work.

You said you have no assets. So, you might consider an Annuity or other financial vehicle to help you save for the future.

The best thing for you to do is conact a professional Insurance Agent or Certified Financial Planner to help you determine what your needs really are. It's hard to explain all the options and make a recommendation without a Financial Need Analysis.

You might want to start with the agent who has your auto insurance.

I wish you the best.

Answer 9

contact northwesternmutual.com and enjoy their web site!

Answer 10

What's the GOAL of the insurance?  Kids through college?  Kids millionaires when you die at 90?  

First you have to set the GOAL, then you select the products.

Answer 11

26 years old, go for a long level term policy.  30-35 years of coverage.  Then again, think about what you want the money to be used for and customize it.

You can have one policy with multiple time riders that will fall off after a certain amount of time.

For sake of argument, lets say you need $750k of coverage.  $300k of that is for college education over the next 10 years.

Well, for the first 10 years of this policy you would be paying for the full amount.  After the need for the college expenses runs out, that $300k drops off and you now have $450k of coverage at a lower amount than before.

The last $450k could be used to cover the cost of a future mortgage, living expenses for your husband, or what ever.  That too can also be customized to drop off after a time.

The point is, find an agent that can get you a good amount of coverage for low cost and still offer a great product.  Not the cheapest, just low cost.  Ask lots of questions about it as well.

Such as:

How does the policy work?

What riders are in the policy and how do they work?

What is the average time frame of the payout?

Upon claim, what happens to the policy?

Upon claim, what happens with the money?

How many policies will I need to cover my entire family?

How much do you get paid off of this/these policies?

What do you have on your family?

etc.

The point is, ask until you are satisfied and comfortable with both what is being offered and with the agent.