Life insurance: a subject that the majority of us millennials have heard of, yet most have never seriously considered partaking in themselves. First, what is life insurance? While it’s a common conversation, particularly around older such as our parents, many people aren’t sure what exactly it is and why they would ever need it.
This article will cover life insurance at a high level, what it is, why we should get it even as millennials and how to go about opting in. As a disclaimer, we do not sell life insurance nor are we licensed to sell it. We are simply raising awareness about it in hopes of educating more millennials toward making the decision to get a life insurance policy that will one day save their families if something bad does happen.
Personally, we have life insurance as well as disability insurance. We will talk more about what disability insurance is and the importance of it in another article.
Our personal background (why do we have life insurance)?
We haven’t always had it. I recently changed jobs to work for one of the largest insurance companies in the world, and as part of my package, I had the option to opt into a variety of benefits such as life insurance, disability insurance and had the choice of supplemental insurance beyond what my company was willing to pay out to us.
Supplemental insurance in the above context just means additional insurance beyond what is provided.
After seeing how cheap it was, I decided to elect into the maximum amount for each category. Now, I obviously don’t plan on dying today, tomorrow or any time soon. I also don’t plan on being so sick that I need to go beyond my paid sick time. However, you never know. So, we are paying something like $50/month for an incredible amount of coverage just in case something awful happens to one of us.
For us, it’s great because it allows us to sleep better at night knowing that if something ever happens to one of us, the other is well taken care of financially.
What is life insurance?
Life insurance is an insurance policy that you buy for yourself that is designed to protect your family if ever you should meet an unfortunate early demise.
Why is it called life insurance?
Life insurance does not insure you of your life as the word might imply. It doesn’t somehow give you insurance to life or that you won’t die. This may be obvious to some but needs to be said as a point of clarity.
However, life insurance ensures that your loved one’s lives will not be altered financially due to your early demise. That your children will still be able to get their college education, that your spouse will still be able to afford their mortgage payments since you are no longer alive to cover your portion of the payments or the bills. Thus, it is important that you first sit and figure out how much money you will need in order to cover all your debts and also for your survivors to keep their standard of living if you were no longer alive. Multiply that monthly amount by 12, then multiply it by 20.
One way to calculate how much life insurance you may need
If you want to know how much it costs to buy life insurance, and you are between the age of 25-35 years old, do the following:
- Total Debt: Figure out how much total debt you currently have.
- Monthly Expenses: Figure out how much money you contribute to bills and other family expenses.
- Multiple: We chose a multiple of 20 as a general rule of thumb.
- Annual Expenses: Take your monthly expenses and multiply them by 12 to get your annual expenses.
- Final Insurance Amount: Take annual expenses and multiply by the multiple of 20 (step 3).
Your “Final Insurance Amount” is how much you should be looking to have your policy declare as the payout amount. So, in the event of your early demise today, that amount when paid to your family should take care of them.
Is life insurance expensive?
No, it is very affordable. It can cost as little as $8-$10 per month for a benefit payment of $100,000+.
Who gets the payments from my life insurance policy?
Buying life insurance is one of the most unselfish things you can ever do. As you’ve clearly gathered from the above explanation, it does not benefit you personally in any way shape or form. It benefits the people around you.
So, who gets the payment from my life insurance policy? The money you get from your life insurance policy goes to your beneficiaries. Put simply, a beneficiary is a fancy term insurance companies use when talking about that special someone or people that you leave behind after you die.
For example, your husband/wife (spouse) is usually your immediate beneficiary, unless certain conditions were taken to prevent him/her from being that special someone that receives the “beneficial interests.” I put beneficial interests in quotes because it’s not like any amount of money is enough compensation for the death of someone you deeply care about. But unfortunately, that is what it is called in the insurance world.
Definition: Beneficial interest – in this example, the right to receive payments from someone who died that included you as the person to benefit or collect payments from an account or policy payout.
If you aren’t married, another example of a beneficiary can be your mother, father, brother, sister, etc. Basically, anyone whom you deem most special to you that you think would take the proceeds from the policy payment and use it to make the life of those you care about easier financially.
Whether it be to pay for future college education of a son/daughter/niece or just to help with potential burial costs, or to make sure your parents are well taken care of when they are old and need to be in a nursing home and you are no longer around to ensure their comfort.
What if those I care about don’t need financial support, should I still get life insurance?
Yes, you should get the minimum amount of life insurance that would at least pay for your burial costs and any potential debt you leave behind. Those costs and debts could land on your next of kin and even if they are well off, why force them to dip into their personal savings in order to cover your personal credit card/ mortgage and burial costs? Would that be the right thing to do if you knew you could keep it from happening?
.jpg)
0 Comments