Even though buying life insurance is so simple, there's a chance you're making a huge mistake. Before we address that, let's a get a few things out of the way...
Life insurance is an important part of any financial plan, as it provides needed funds should your spouse pass away. It's tough to think about, but imagine if your spouse were to suddenly perish in an accident.
Say they were the breadwinner in the family. What would this mean for you and your children? Would it mean that you'd have to go back to work to support your family? Would it mean that you'd have to put your children into daycare? Would it mean you'd have to sell the house because you could no longer afford the mortgage?
These are just a few of the devastating financial possibilities that can occur upon the death of your spouse.
One could easily reverse the scenario and imagine if you passed away to leave your family to fend for themselves. That is probably the more frightening thought.
It's easy to see why life insurance is so important in the midst of such a tragic event. I come back to my question: Do you have life insurance?
If you do, that's great. But are you making the number one mistake that many people make when it comes to their life insurance policy?
This, is the number one mistake. Why? Many people can't take their life insurance policy with them if they quit or get fired from their job. That's a problem because those who solely obtain life insurance through their employer may not think to get life insurance again after they switch jobs.
Marvin H. Feldman, President and CEO of LifeHappens.org tells us:
“Employer provided group life insurance is an excellent benefit, but its major drawback is that when you leave your employer for another opportunity, you leave this benefit behind. Your new employer may or may not provide the same level of benefit or perhaps none at all.
Your need for the life insurance does not go away just because you changed or lost a job, so it is important you have personally owned life insurance that stays with you when you make these changes. Your financial obligations don’t change, only your job.”
A Life Insurance Case Study
Some couples, however, are smart and obtain life third-party life insurance in addition to their employer-sponsored plan. And for many, it may even make sense to drop employer-sponsored plans altogether and opt for third-party coverage.I worked with one couple who did just that. The husband was paying $24.96 per month for $284,928 in coverage through his employer. They also had a third-party term plan on him that was $30.42 per month for $500,000 in coverage.
This amounted to $55.38 per month for $784,928 in coverage for the husband.
The wife was paying $29.29 per month for $403,872 in coverage through her employer. They also had a third-party term plan on her that was $12.92 per month for $150,000 in coverage.
This amounted to $42.21 per month for $553,872 in coverage for the wife.
This couple was in their 30s and I knew they could do better than that. I helped them explore their options and found insurance that gave them more for their money – and they were able to drop their employer-sponsored plans, too.
The husband now pays $58.29 per month for a new policy with $1,000,000 in coverage. The wife now pays $35.89 per month for $750,000 in coverage.
Source: Forbes
