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Hi Gary
- Congrats on the new baby! I'm sure this is an exciting and tiring
time, so kudos to you for having the wherewithal to look ahead.
Life insurance is a must-have for anyone with dependents, and there
are definitely good and bad policies, so I'm happy to offer my advice.
When choosing coverage, you're essentially picking between term
and whole life insurance. The difference is pretty basic on its
face - term life insurance covers a specified term, usually ranging
from 5 to 30 years. Whole life, unsurprisingly, offers coverage
until you die, with a set premium until the policy is paid in full.
If you've heard of people talking about life insurance as an investment,
they're referring to whole life insurance. As you pay money into
your policy, you build up a cash account from which you can withdraw
later in life. You can also theoretically borrow against these funds,
leveraging the asset. Whole life insurance has surface-level appeal,
but that's about it. In my opinion, you don't get out of it what
you put in.
For starters, whole life policies are expensive. You spend nearly
10x what you would on good term coverage, and while you're supposed
to see some of that money when you get older, there are far better
investments you could consider. The point of life insurance is to
provide a safety net in the event of your passing. If you're putting
tons of money into this policy each year during your 30s, 40s, and
50s, you're hurting your spending power during your best years and
not investing as wisely as you could be. And, throughout the process,
you're not doing any better by the family you're trying to provide
for.
With a 20-year term, you eliminate the hoopla and secure a respectable
settlement should tragedy strike. You'll save money each month,
you'll get the peace of mind you seek, and your family will be covered
should something happen. You should be able to get monthly premiums
below $50 a month, and then you just need to renew well before the
term expires.
You can certainly look into 10- and 30-year terms as well, but I've
found 20 delivers the best pricing and flexibility. If you want
to learn more about term policies and how they compare to whole
life insurance, you can check out a post I've written at GoFarWithKovar.com.
It's good that you're thinking about life insurance, Gary. Now it's
time to stop thinking and buy, because the longer you wait the higher
the premiums rise and the more risk you endure. Take care of it
now and get back to enjoying life with your new child. Thanks for
the question!
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