Protecting Yourself and Others

This is not an easy topic to talk about and realistically no one likes to. Insurance… It is necessary, but not in all cases and not the same amount. Insurance salesmen and companies rank up there with used car salesman and lawyers in my book. They feed on your fears and convince you what you need, but the question is, is it?

Let me tell you about my situation first. My company offers insurance that directly comes out of your paycheck. One year, for some reason I thought it would be a good idea to sign up. So I read through some things, looked over the cost and decided it would be a good idea to up my policy. But, I did not want to have to go through all the rigor of tests, etc. so I took the Whole life option and set it for 10x my pay. This way my wife and family were set should anything happen. My wife had no idea I had done this, but the discussion came up after I Sudden Cardiac arrested in 2009 (that is another story for another day, but the picture is me, just 2 months after). Thankfully she did not have to benefit from that policy, but it did provide some assurance when we talked about it. Fast forward to 2020 and I was listening to Ramsey talk about Life Insurance, so I looked over my policies. Low and behold I realized now what I had signed up for. After 10 years of paying on this policy I had over 15,000 set in an account. Wow, that sounds nice, right. Not when you realize what I was giving the insurance company to make a measly 3% interest on. So I switched everything over to term, took my money out, paid off our car loan and saved upwards of $400 a month, while doubling my insurance coverage.

Now, when you look at the $15,000 I got, it sounds great, but the reality of it…$400 a month over the course of 10 years, properly invested earning a modest 10% should have $81,000 in it, combined with a Term Life policy, my wife would have had the proper insurance to take care of the family, plus an extra $81,000, instead of just the insurance money.

That is why you take term life and not whole life. Do not be fooled!! They are not investing money for you, they are making money from you.

What about your family, spouse and kids? Do they need insurance?

Your spouse most definitely needs insurance. Term life for sure. If he/she is home then about 50% of your salary should be the coverage, because you are going to need support and help with the family should anything happen. If they work, then 10x their salary. That will keep their salary coming in for the future, as you will take that money to take care of the funeral costs, and the remainder will be invested to continue to provide that income for the future.

Kids… This is a tough one that I have taken flack for because everyone loves their kids. Until a person is actually taking care of someone, they really do not need insurance on them. Gerber loves to market life insurance out there and give you that free 1,000 policy, but the question is why? Should something happen to your kids, it will be heart breaking, but all you really need to cover is funeral expenses, which on average about $3,500 to $8,000. If you have a fully funded emergency fund, you should have this covered, if not, then it is time to start saving. Over 2 years, if you put aside about $140 a month you will have $3,500 saved and your kids are self insured.

Now, instead of putting a modest $12 a month into a policy for your kids, take that and put it into an investment account. I know it is not much, but trust me… $144 a year from the age of 0 till they are 10 equals $2,500, take that out to the age of 20 and they have $9,000 in an account.

I know this sounds morbid and all, but don’t fall for the fear that insurance salesmen put into you or things your read. There are roughly 3,800 children between ages 1-4 that die per year, 5-14 just over 5,000. The number of kids that die before age 20 is a very small percentage, barring some other diseases, etc. So look to their future, rather than planning for the 1% chance that something may happen to them. They will thank you when they are finishing High School and on their way to adulthood.

As you reflect on this topic, do a check up on your coverage, take care of your own insurance, making sure you have 10x your salary covered for you/spouse, 5x for a support person in the household and just start investing for your kids future. If you need help or questions, send me a message email, Facebook or Instagram, whatever works for you.

God Bless!