Personal Finances: Term life insurance is cheap, and most adults should have enough

Alright, we’re all panicking about a global pandemic and the potential financial chaos that could ensue. It’s out of our control, which is frustrating. So here is a crucial piece of financial planning under your control that is also inexpensive and easy to obtain: term life insurance.

Chances are, you can get a policy without ever leaving your shelter, uh, your home. Everyone knows deep down that they need life insurance, but many households do not have a policy in place. Some have insurance but not enough.

With a term policy, you pay an annual premium (you can also make quarterly payments) for a set period. This is what the term refers to. With a “level term” policy, the annual premium will never change. If you die during the “term”, your beneficiary receives the death benefit of your contract.

If what’s holding you back is more emotional – you just don’t want to think about your mortality – consider an even more difficult scenario: you don’t deal with it, and something happens, leaving your loved ones financially vulnerable.

Here’s how to provide financial peace of mind to anyone who depends on your income. (If there is a stay-at-home parent, that person should also have a policy; factor in the cost of hiring people to provide the care the parent now provides.)

Decide how long you need insurance. There are two types of life insurance: term life insurance and a variety of “permanent” policies. Insurance agents love to sell permanent policies because they come with much higher premiums that earn them much higher commissions. The point is, most of us only need term life insurance to provide this “what if” protection for a defined period of time, not permanently.

If you have young children you might want a 20 year policy to make sure there would be enough income to raise and educate them if something were to happen to you. Or if you’re younger and haven’t built up your retirement savings yet, a 20- or 30-year policy would provide a financial cushion. The term is all you need. (Note: If you have a child with special needs or someone in your life whose need for your support will last a lifetime, you may want to consider a permanent life insurance policy.)

Your employer policy is not enough. Typically, your beneficiary would receive maybe one year of your salary. Make sure your dependents are going to be around much longer, okay?

A term policy with a death benefit equal to 10 or 20 times your current income needs gives you peace of mind. Don’t worry, term life insurance is so inexpensive that the cost of all of that protection is probably doable.

There are worksheets online to help you estimate the reasonable amount of a death benefit. In 30 seconds you can get a rough estimate of the premium costs on Termforsale.com.

A policy that pays out $ 1 million if the life insured dies over the next 20 years could cost a healthy 35-year-old non-smoker $ 30-40 per month. At 45, the cost can reach around $ 80 to $ 100 per month.

Even if you’re 55 and in good health (that doesn’t mean you’re in 10K shape), a policy that pays you $ 1 million if you were to die in the next 20 years could cost $ 200. $ 250 per month. It’s no small feat, but given the stakes, it’s also likely that you can find the money by cutting your budget.

Online companies such as Accuquote.com, Policygenius.com, and Quotacy.com make it easy to find term insurance. There’s no need for a face-to-face meeting, and they specialize in term policies, so there won’t be any upselling for expensive permanent life insurance.

You will start with a detailed online questionnaire that will teach you about your health and your work. Honesty upstream saves you time. Eventually, in the process, you’ll agree to let the insurer check a large database of your health records, so anything you don’t mention will show up. Want to see what they see? Check with your medical information office on mib.com.

If you have a history of smoking, that doesn’t mean you can’t get life insurance, just that you’ll pay more. The use of medical marijuana and the legalization of recreational use in some states is not necessarily an issue either. Quotacy.com has a web page that explains.

Most insurers require a very basic medical examination – blood test, blood pressure, weight, etc. – but even this can happen at home, at the expense of the insurer. They will send someone to your home, but if you apply during the coronavirus crisis, that appointment could be put on hold until we get the green light.

Carla Fried is a freelance personal finance journalist. Distributed by Tribune News Service.

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