Ideas, tips and news about life insurance and the uses of life insurance

I was inspired by a segment of 60 Minutes I watched this past Sunday.  The story was about the people in Wilmington, Ohio, who are in the grip of a brutal series of layoffs at DHL, the shipping company.  Before the layoffs, one of three households in Wilmington had a family member working at DHL.  As expected, the layoffs have left this town decimated.

I was particularly touched by the strong sense of community these folks displayed, reaching out to help the less fortunate until they no longer had the resources to help.  When some helpers stumbled, others reached out to those in the most dire need of help.  Once again, my cynicism of the increasing materialism of Christmas was allayed by a story of goodwill and hope.

One of the stories revolved around a mother who was laid off after her husband had passed away, leaving her with a young child to support on her own.  What made her plight even more difficult was the fact that her deceased husband hadn’t owned a life insurance policy, leaving the family with meager resources.  Working several part time jobs, she was barely able to keep her family afloat.

Based on her experience, life insurance was so important to her that she did everything she could to hold onto the policy she purchased after her husband passed away.  She even dropped her health insurance so she could continue making her life insurance payments.  Making sure her daughter wouldn’t have to suffer financially if she was no longer around to support her, she made the decision that her health would have to suffer rather than not providing for her daughter in the event of her death.  While I wouldn’t recommend her to drop her health insurance, I can’t argue her act of selfless giving.

I hear this quite often when speaking to couples in their twenties and even into their thirties.  However, according to the Life and Health Insurance Foundation for Education (LIFE), there are several compelling reasons to reconsider this line of thought:

Protection…just in case.

Statistically, you’re unlikely to die in your 20s or 30s.  But the truth is, there’s no way of knowing for sure.  That’s why you should buy life insurance as soon as a need arises, like when you become engaged to be married or decide to have children.  If you are already married and/or have children, you most probably have a need for life insurance.

Guaranteed Insurability

When you’re young and healthy, your insurability is at its peak and, if you’re in good health,  you’ll be rewarded with preferred rates.  If you wait too long, there’s always a chance that you might develop health problems that could compromise your ability to afford or qualify for coverage.

Low Cost

All forms of life insurance get more expensive as you get older.  So if you know that you’ll need coverage soon or already have a need, you can lock in a low rate now and rest easy in the years ahead knowing your loved ones are protected.  As an example, a healthy twenty-five year old male, if in excellent health, could purchase a $500,000, 30 year term policy for as little as thirty dollars a month.  If he waits another ten years, he will pay an additional ten dollars a month (based on current rates and provided he remains in excellent health.

For more unbiased information on life, health and disability insurance, I recommend LIFE’s website at http://www.lifehappens.org/welcome-consumers.

If you’re thinking of replacing your life insurance policy with a new one, here are some things you should consider, according to the Life Insurance Buyer’s Guide published by the National Association of Insurance Commissioners:

1.  If you decide to replace your policy, don’t cancel your old policy until you have received the new one.  You then have a minimum period to review your new policy and decide if it is what you wanted.

2.  It may be costly to replace a policy.  Much of what you paid in the early years of the policy you have now paid for the company’s cost of selling and issuing the policy.  You may pay this type of cost again if you buy a new policy.

3.  Ask your tax advisor if dropping your policy could affect your income taxes.

4. If you are older or your health has changed, premiums for the new policy will often be higher.  You will not be able to buy a new policy if you are not insurable.

5.  You may have valuable rights and benefits in the policy you now have that are not in the new one.

6.  If the policy you have now no longer meets your needs, you may not have to replace it.  You might be able to change your policy or add to it to get the coverage or benefits you now want.

7.  At least in the beginning, a policy may pay no benefits for some causes of death covered in the policy you have now.

In all cases, according to the Buyer’s Guide, if you are thinking of buying a new policy, check with the agent or company that issued you the one you have now.  When you bought your old policy, you may have seen an illustration of the benefits of your (permanent) policy.  Before replacing it, ask your agent or company for an updated illustration.  Check to see how the policy has performed and what you might expect in the futuree, based on the amounts the company is paying now.