It may be something we don’t want to think about but it doesn’t have to be difficult.
You make at least a hundred different decisions every day. There are quick and easy ones: What time to wake your kids up for school? Which food is least likely to be snubbed by your family? Then there are more challenging ones: Which school your child should attend? Is 12 to young for a cell phone?
Then there are difficult decisions that we struggle with, and that can lead to a catatonic state of procrastination.
Financial decisions top the list of items that people put off making decisions on1, particularly when it comes to purchasing life insurance. The truth is, it may be something we don’t want to think about but it doesn’t have to be difficult.
To make purchasing life insurance easier, here are five questions you need to ask yourself:
1) How Much?
Everyone’s financial circumstances and priorities are different but here are some questions to help you focus on what your family would need if you were to die:
- How much money will your family need to meet immediate expenses such as funeral expenses, legal fees and outstanding debts and mortgage balances?
- How much money will your family need to maintain their standard of living over perhaps several years?
A simple starting point is to look at your monthly expenses. List everything that you have to pay for – food, utilities, transportation, housing costs, extra-curricular activities for the kids, and your child’s post secondary education. Then determine how many years you want to cover these expenses.
2) Can We Afford It?
The ability to manage all of your financial obligations can seem daunting at times and adding one more bill to the growing pile is something you probably try to avoid at all costs.
You’re not alone. One of the top reasons why people delay buying life insurance is the perception that it is too expensive.
However, many life insurance options are extremely affordable. The important thing to remember is that some life insurance is better than nothing.
There are many quick life insurance on-line quote tools that can show you how much life insurance you can purchase within your monthly budget. This may mean opting for a smaller policy initially but as your financial situation changes, debts are paid off or a salary increase occurs, you can always opt to add more life insurance coverage.
3) What Type?
While all life insurance plans are designed to pay a benefit when someone dies (called a “death benefit”), there are two basic categories of life insurance: term life insurance and permanent life insurance.
Term Life Insurance
Term life insurance is designed to provide a specific death benefit if you die during a specific period of time, or “term” as the name indicates. The term may be a fixed number of years (eg. 10 or 20 years) or to a set age (eg. age 75). If you die during the term of the policy, your beneficiaries will receive the death benefit. If you don’t die during the term of the policy, no one gets the death benefit and the insurance ends.
Permanent Life Insurance
Permanent life insurance is designed to provide you with insurance protection for your entire life, no matter how long that is. This means you can keep your life insurance coverage as long as you live and pay your premiums.
In simple terms, the difference between permanent life insurance and term life insurance is like the difference between buying or renting your home. You can rent a home to meet your temporary needs and if you decide you need it longer, you can usually continue to lease it again, and again, but the rent increases each time you renew the lease - similar to term life insurance. Permanent life insurance is like buying your home. You can keep it for as long you want, provided you make the payments, with the added potential of building equity.
It is important to note that both term life insurance and permanent life insurance have many subcategories or variations that can allow you to tailor your life insurance policy based on your needs. Each type of life insurance has benefits, but the reality is most Canadians will have the need for both.
4) Where Can I Get Advice?
Discussing your life insurance needs and options with a life insurance advisor typically doesn’t cost you anything, and an advisor will provide you with valuable information that can help you purchase the life insurance you need and can comfortably afford.
Just like every other important choice that life presents to us - choosing a partner or spouse, a job, or a place to live - selecting your life insurance advisor needs careful consideration. In the end, choosing an advisor comes down to trust. You will be providing your advisor with many details regarding your financial life and you need to feel that your advisor has listened to you and given you good advice about the insurance that’s right for you based on your needs.
Don’t be afraid to reach out to a life insurance advisor to help you with customizing an insurance plan that is right for you and your family. An advisor can help you get organized and he or she can leverage their industry knowledge to take a ton of work off your plate.
Find an Advisor can help connect you with an insurance advisor. Check it out.
5) How Complicated Is It To Get Life Insurance?
The purchase of life insurance does not need to be a complicated process.
There are also easy-to-use online insurance applications that can be completed in the comfort of your own home while a life insurance advisor walks you through it either while talking with you on the telephone and using a computer screen sharing software, or by meeting with you in person, whichever you prefer.
Life insurance is a valuable tool that can be simple and easy, flexible and dependable and make sense no matter what your personal situation.
Take the initiative now, help protect your family and make the important decision to purchase life insurance.
1Source: Using Behavioural Economics to Sell, LIMRA, 2012