Money Matters Life Insurance

 When was the last time you reviewed your life insurance needs? It’s probably been a long time…
Life insurance isn’t all that much fun to buy, much less talk about, but it should be a critical part and the starting point of your financial plan(s). A life insurance policy is a pact between you and the insurance company. As long as you pay the premium, the insurance company will be there to pay a death benefit to your beneficiaries if you pass away, giving them the cash to meet their immediate and short term financial responsibilities. By no means is it an end all solution to the financial well-being of your heirs but it is a start to an overall sound financial portfolio.
When should you get life insurance?  Seriously – in the very first stages of your professional life, when getting married, when the family size is increasing. You have a need for protection and the dollar amount of that protection is always increasing as your family size grows, debts accumulate, financial responsibilities increase, etc.
Going without life insurance can leave your family, spouse or other dependents facing enormous bills and financial obligations with little or reduced income. I strongly recommend that your first life insurance policy be a term policy with a 20 to 30 year term.  It is key that you lock in a low premium for as long as possible that cannot be taken away should your medical condition worsen as you grow older. These are the cheapest life insurance policies you can buy.  When your life becomes more complicated and you may be looking for an investment component to your life policy then Whole/Variable Life could be a solution for you in that you are still insured but have an investment and/or tax deferred element to that life policy.
Some employees might be tempted to just sign up for a life insurance policy through their employers. These plans have a death benefit that’s a multiple of the worker’s salary, with the employee able to buy additional coverage. Such group plans make sense for employees who might not be able to get a policy on their own due to pre-existing health issues. But these plans come with a huge downside that makes them inappropriate for many.  If you leave the employer, you cannot renew. If you leave a company after working there a decade for instance, you’ll need to buy your own life insurance policy. But at that point you might not be insurable, due to a health issue that arises, or you’ll face higher premiums because you’re older.
The general rule of thumb is to have a enough coverage to cover all the family’s debts, be it mortgages, auto loans, credit cards plus a minimum of three to five years gross salary of the deceased family member’s income.  An individual in a family environment that has a mortgage of $400,000, consumer credit debts of $75,0000, and makes $100,000 a year in gross wages may need insurance of anywhere from $775,000 to $975,000 with consideration of the number of children and their college education funds needs which could increase the amount of life insurance needed exponentially.
As you get older you might want to consider morphing your term life insurance policy into a whole life policy, which many life insurance companies will allow you to do. These are complex life insurance contracts that blend a savings and investment account with a traditional death benefit, or payment to beneficiaries on the death of the owner of the policy. These whole life policies require you to pay an annual sum, part of which goes to the life insurance policy, but also allows cash to build up in an associated account that can be paid to beneficiaries shielded from tax.
Whole life policies can make sense for people who have already contributed the maximum to their 401(k) plans, IRA’s, alternative investments, etc. and are simply looking for an additional investment source with tax benefits.
With the right financial planning and understanding of how life insurance fits into a financial plan, it’s one of the easier things in financial planning to take care of.
For more information, please call Douglas J. Sedam at 1-866-549-3900, 661-295-2400 #1 or email: Doug.Sedam@ThePaseoGroup.com.  You may also learn more at www.ThePaseoGroup.com.
Securities and Investment Advisory Services offered through Financial West Group which is a member FINRA/SIPC. OSJ Office: 4510 E. Thousand Oaks Boulevard, Westlake Village, CA 91362, Phone: 1-866-502-8929 The Paseo Financial Group, Inc. and Financial West Group are unaffiliated companies. The Paseo Financial Group, Inc. encompasses the following companies: The Home Loan Pros – Residential, Investment, & Commercial Real Estate Mortgages; Oak Tree Realty – Residential, Investment, & Commercial Real Estate Sales; and The Financial Services Pros – Investments, Insurance, & Retirement Planning.