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Hi Taylor
- I just had a baby and almost immediately started thinking about
how I need life insurance. I haven't really looked into it at all
and was wondering if you had recommendations.
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! |
| Legal Disclaimer:
Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.
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