Both my parents died before I got out of high school.  At the time of his death (2 years after my mother passed away) my dad was just about broke and bankrupt. But fortunately he bought some life insurance just before he died. He made one premium payment of $50 and was then killed in an airplane accident.  Me and my 3 siblings collected a total of $100,000.  This was back in 1974.

Because of that term life policy my siblings and I were able to go to college and rebuild our lives.  I hate to even think of what would have happened to us had my father not bought that term policy.

Having said that, I want to be completely clear about one thing.  You may not need life insurance.  I’ve met lots of people who have life insurance and don’t need it.  But I’ve met more people who actually do need life insurance and don’t have it or have the wrong kind or don’t have enough.  I’m going to help solve most of those problems for you right now.  Eventually, I’ll address all these issues and more.   Let’s get started.

Who Needs Life Insurance?

If other people depend on the income you provide by working, you need life insurance. Why? Because if you die your income disappears.  And if other people depend on an income that dies with you, their situation will become desperate unless you have insurance. It’s as simple as that.

Why is life insurance the best way to protect the people who depend on your income?

The minute you buy the insurance your family is protected. That’s why we collected my father’s insurance even though he just bought the policy the month before.  Term insurance is also really inexpensive as you will see. How else can you instantly guarantee the financial security of your family other than owning insurance?

How term insurance protects your family

Buying life insurance is the least-cost way to replace your income if you aren’t around to earn it. When someone with life insurance dies the insurance company pays off a large lump sum.  The survivors then invest that money to create the monthly income they need.

As I said, there is no other way to instantly guarantee that your family will be taken care of should something happen to you.  That’s why life insurance is so important.

Why is term life insurance better than other kinds of life insurance?

There are two broad classes of life insurance; term and permanent life insurance.  Term life insurance is much cheaper than permanent life insurance – sometimes it only costs 1/10 what other insurance costs.  Why?  Because term insurance is like car insurance or homeowners insurance.  You own it as long as you make your premium payments.  Simple.

Permanent life insurance (whole life and universal life) is very different.  They charge you much more money because they take a percentage of that premium and invest it for you.  The goal is to invest the money so that one day that investment is so large that the company can get the premiums from the investment account rather than charge you.

The problem is that the insurance company charges you tremendous fees for this, you may have very little control over how the investments are made and you may be forced to hold on to insurance after you really don’t need it anymore.

How exactly does term life insurance work?

You buy term life insurance for a particular time period.  It could be 10, 20 or 30 years.  Over that period the premiums stay the same and so does the death benefit.  Those premiums can’t be changed even if your health deteriorates. That’s a good thing. After that period you don’t make premium payments and the coverage goes away.

Most people buy term life insurance to last as long as they continue to work.  After that time, the plan is that they will have saved enough to retire and/or have other sources of income such as Social Security and pensions. Also, by that time, your financial obligations are probably going to be considerably smaller.  As a result, you probably won’t need the insurance at that time.

What are the problems with term life insurance?

The one beef some people have with term insurance is that you don’t have anything to show for your premiums at the end of the term if you are still alive.   This is true but if you work out the numbers you’ll see that term insurance is often still the way to go. When I compare term to whole life you’ll see for yourself.

The Right Way to Buy Term Life Insurance – and save a ton of money

The best way to save money when you shop for term life insurance is to know two things:

1. Know how much insurance you need.
2. Know how long you need the coverage.

Obviously if you have the right amount of insurance for the right time, you won’t be paying for something you don’t need.  Taking a few extra minutes to discuss these issues has saved my clients thousands of dollars in wasted premiums.  You can benefit by addressing these questions as well.

Once you are clear on your life insurance needs, the next step is get quotes.  If you are in good health, it’s easy to get cheap life insurance quotes.  But if you have a medical condition, it’s going to be a little more involved.  The cost of your coverage really depends on your health situation.  If you do have a health condition, it’s best to speak with a specialist to determine the best way to get you the coverage you need.