- Life insurance can pay bills, cover debts and protect those who rely on your income through the payment of a tax-free death benefit to your beneficiary.
- Here’s why you may want to include life insurance in your long-term financial plan.
Many people think of financial planning primarily as a two-pronged strategy: managing current income and debts and then saving and investing for the future. But there’s another component to a comprehensive financial plan that’s often overlooked: protection. This is where life insurance comes in.
Your protection safety net
Life insurance can pay bills, cover debts and protect those who rely on your income through the payment of a tax-free death benefit to your beneficiary. It’s a protection safety net that makes it easier to sleep at night, and this holds true even if you’re under age 30. Your financial plan is all about mapping out strategies for future life stages and the major milestones ahead, such as marriage, parenting, home buying and accumulating income sources for retirement. Life insurance provides a relatively inexpensive way to make sure all your plans stay on track even if something happens to you.
Life insurance for 20-somethings? Yes, indeed!
Here are 6 reasons why you may want to include life insurance in your long-term financial plan.
- You’re married. Even if your spouse works, chances are good that your married lifestyle relies on your combined incomes. If your income gets taken out of the equation, will your spouse be able to maintain some lifestyle continuity while dealing with the emotional loss?
- You have kids. This is a no-brainer. Children can’t earn income and are totally dependent on your income. Sufficient life insurance can keep them in daycare, extra activities and even help pay for college down the road without unduly burdening other family members.
- You have a mortgage. Another no-brainer. A home is the largest debt most people ever carry. Insurance can keep loved ones in a home by paying off the mortgage. Owning a home can provide a lot of financial security for your survivors.
- You have student loans or other large debts. Next to a mortgage, student loans may be your largest debt. If your parents co-signed your loans, would you want them to be stuck having to repay your loans from their retirement savings?
- Your employer coverage could be volatile. Educators change jobs a lot. Group coverage through your District may not be portable and may have too low a face value to cover your needs. Self-insuring by purchasing individual coverage puts you in control of your protection plan.
- You want the lowest premiums. Life insurance premiums get more expensive as you get older or if you have health problems like high blood pressure. Buying in your 20s while you’re healthy lets you lock in the lowest rates for the next 10 to 20 years.
Affordable options for the under 30 crowd
Group Term Life. This type of policy provides a stated benefit upon the death of the policy owner. The policy does not provide any returns beyond the stated benefit amount.
Coverage from $25,000 to $500,000 is available. Premiums are based upon the age of enrollment and increases in 5 year age bands, and you may adjust coverage during the life of the policy. Once coverage is issued, you cannot lose coverage due to health reasons and coverage remains in force up to age 80, although benefits begin to decline at age 70. Discounts are available for non-smokers. There are no set term limits and medical underwriting may be required.
Term Life Insurance is best suited for those who know for certain their need for life insurance coverage will be temporary—that they will have accumulated enough liquid assets to self-insure the funds/protection needed, or that surviving family members will no longer have a need for the extra protection life insurance provides.
Level Term Life. A fixed benefit amount is provided for a fixed period of time for a fixed premium amount. Coverage is available for up to $1,000,000, and 10, 15 and 20 year terms are available. Full coverage (no benefit reductions) will remain in place up to age 80.
The younger the age at which you purchase coverage, the lower the rate will remain for the duration of coverage. Premiums will not increase due to your age and benefits will not decrease for the entire term. Medical underwriting is required. A discount for non-smokers is available.
Level Term Life Insurance is best suited for those in good health who have a fixed time period or need for protection, such as putting children through school or paying off a mortgage. A new Level Term policy may be purchased at the end of the initial policy, but you must reapply and the premium is based upon your current age.
The bottom line
Ask yourself a simple question: Would someone I love suffer financially if I died? If the answer is yes, it’s time to start shopping for life insurance quotes. Check the NEA’s affordable coverage options and get quotes to find the coverage and rates that fit your financial plan.