financial language of love - Ep #66
What is one of the best ways a husband, wife, father, and mother can show their love financially? Hint it’s not diamond rings, cars, fancy trips, or a big house. It’s WAY cheaper than that.
In this episode...
Financially caring for family in case of an accident [1:15]
5 factors that impact the price of life insurance [4:43]
The right type of Life Insurance [7:08]
If you died yesterday, how financially secure would your family be today, tomorrow, and for the years to come?
This is an incredibly depressing thought no doubt, but that’s exactly why we should address this just-in-case scenario. Because if you love your family, you will want to make certain that they are taken care of financially if you are not here today. Term life insurance is the only instrument that can provide sudden wealth for your loved ones in their greatest time of need all for just a fraction of the cost of the wealth obtained.
Term life insurance can be incredibly inexpensive far too many Americans lack life insurance. Too often you see, what I refer to as the worst type of life insurance, the GoFundMe page. But with term insurance being priced like a commodity, it really shouldn’t be this way for millions of families.
Some people don’t bother with Life Insurance because they don’t want to “waste” money on term life insurance premiums. I can certainly relate because that’s the reason I never purchased term life insurance for many years.
For those who worry about the cost of life insurance here are the five factors that impact the price
#1 - A person’s Age - all things being equal, a 35-year-olds policy will be less expensive than a 40-year-olds
#2 - A person's Gender - Men are more expensive than women. Men do stupid things and have a higher probability of death at all ages.
#3 A person’s health rating - Think, BMI, smoker/non-smoker, etc ones driving record is also included.
#4 The amount of the benefit - $2m of coverage will cost you more than $1m
#5 How many years you have coverage - Getting coverage for 10 years will be less than 20 years of coverage.
I must note that life insurance shouldn’t just be for the working spouse. If there is a stay-at-home parent they need life insurance as well. We cannot underestimate their contribution to the family. If they were to pass it would be devastating for the family and sure money would never replace their absence, it would help ease the tremendous burden so the working spouse can take the requisite time and have the means to help their family heal.
Tips Tricks and Strategies
I absolutely love what I do but it wasn’t until after a lot of research that I finally found my dream career. This career has married things that I love, namely personal finance, education, and being able to have a positive impact on others and for that reason, I became a Certified Financial Planner in order to have the greatest impact on my clients. But that’s not actually, how it started out for me. Due to my naiveté, I joined a “financial services" firm that claimed to put financial planning at the forefront of what they did but in truth, they primarily pushed expensive insurance that the overwhelming majority of people don’t need. But, in my defense, it wasn’t anything like what I was promised during the interviews with the firm. I had interviewed a few actual CFP®s from the firm who spoke of the merits of being fiduciaries, a fiduciary is a professional that puts the interests of clients above their own, (apparently, this was in name only) and they in fact did not do comprehensive planning nor were they fiduciaries but the main efforts was to sell really expensive life insurance.
What sort of expensive Life Insurance am I talking about; namely Index Universal Life (IUL), Whole life, and similar permanent life policies? Life insurance legally cannot be sold as an investment, but there are far too many instances where an IUL is sold as such. More importantly, they don’t even determine if these policies are in the best interest of the individual as permanent insurance is almost always sold and rarely bought.
You might be wondering, are permanent life insurance like IUL or whole life so bad? The answer is yes because with very rare exceptions term insurance is all you need and permanent policies are WAY MORE EXPENSIVE and leave a person with way less wealth than other solutions. Jeremy Schneider compares investing in an IUL policy vs an index fund and the results are remarkable. He showed how an IUL policy could erode over 80% of your wealth compared to investing directly in an index fund.
Some say I want whole life insurance because I don’t want to waste the money. You hope it’s a waste because it’s insurance.
References
Is Whole Life Insurance a Good Investment? - NerdWallet
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