Ep. 47: Term Insurance & Why Now?!
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Welcome back to Money Matters! My name is Michael and I’m here to help guide you in becoming a better and a more confident investor. Coming off the year 2020 there has been a lot to unpack but it’s the uncertainty that COVID-19 brought that made a lot of people more aware of their mortality and with that triggered a large jump in insurance applications. The industry has seen a huge interest in the younger generations who want to make sure that their families are covered if god-forbid something was to happen to them. And with Youngers buyers often times being first-time applicants and not entirely sure how life insurance works, I figured in this video I would share some light on some of the conversations I’ve been having to help ease you through the application process to get those most out of your insurance coverage.
Right off the bat, I get the questions on whether someone needs life insurance. And while this a personal topic just think for a moment – if something were to happen to you, would people you care about suffer financially? And this could be from your lack of salary, or mortgage payment is missed for example. If you answered yes to this question then I’d say life insurance is worth exploring. And these issues are really where you should be focusing on your insurance needs. Income replacement and debt if you were no longer around. And this of course takes planning. An example could be opting out of mortgage protection insurance, and instead, buy a low-cost term policy. And then as time goes on and your mortgage debt decreases, your term policy will still pay the same amount. So if something was to happen to you and say you had $50,000 left on your mortgage, and say your term policy paid your spouse $400,000. That $350,000 difference can then be used towards other financial needs you may have.
Obtaining life insurance has notoriously been a more cumbersome process, but with people living longer and generally healthier there are now simpler options available. Online applications matched with no blood, or urine testing helps facilitate this process to more individuals who seek this protection with less of a hassle to do so. According to the society of actuaries more and more issuers are relying on prescription drug data and electric health records to expedite this process and cut approval time down.
The National Association of Insurance Commissioners states that these efficiencies have in some cases cut down the approval time from weeks to hours, with some individuals not even having to take a medical examination. Youth is on your side! And the worst-case scenario is they come back and say you need a medical exam, which isn’t the end of the world.
And going off that ‘youth is on your side’ comment – the younger and healthier you are when you apply typically the more cost you will save on the premiums. So in this case yes it pays to be younger. For my fellow millennials, if you have loved ones that rely on you for financial security and you don’t have life insurance certainly talk with your trusted financial partner to see if this is something worth implementing in your overall plan. Or feel free to give me a call as I would be more than happy to answer questions and see if it’s something you should be looking into. And understand that no one wants to pay for insurance. It’s one of those things you pay for hoping you’re not going to need it. But it’s those times when life isn’t fair which is when you need it the most. No reason to add financial stress on top of an already stressful, or unthinkable situation.
And life insurance doesn’t have to be permanent, and in most cases, it shouldn’t be. A simple affordable term insurance policy will suffice. Just look at your life and see what years you need coverage and for how long. For example, if you’re 35 years young, and have a young family and a mortgage, then look at a 20-year term policy that will cover all your debt, and replace your annual income for a few years to help your family get back on track if the unthinkable was to happen. A simple metric would be ten times your salary. So if you’re in the $100,000 salary range then you’re looking towards a million-dollar policy. But this is a generalization and not a blank recommendation for everyone which is why I would recommend speaking with a professional to figure out which term policy would be right for your family's specific needs.
Thank you for watching, and as always thank you for giving your finances the attention that they deserve!
