What life insurance should I have? Or how do I buy life insurance?
Okay, I’ll admit it, I used to be a life insurance salesman. However, I do not have any to sell you today. Nor do we sell life insurance at Orchard Alliance. With that out of the way, let’s talk about life insurance. I know it is on your mind as a person growing in financial discipleship..
Life insurance has different purposes at different life stages. For young families I will make note of two main purposes:
To replace income if one spouse gets called to heaven with dependents. And remember you have made a vow to care for your spouse.
To provide resources for guardians to raise your children if the Lord were to call you home and leave your children as orphans.
Scripture has much to say about caring for dependents. Paul teaches in 1 Tim 5:8 “Anyone who does not provide for their relatives, and especially for their own household, has denied the faith and is worse than an unbeliever.”
Now to the question at the top, “What Life Insurance Should I have?” Or maybe what kind and how much?
Here is a basic primer on life insurance.
Pricing of Life Insurance
Privately owned life insurance is priced for your age, life expectancy and health rating. The younger and healthier you are the less expensive it is. Or said the other way, the older you get the more expensive it becomes.
Group life insurance, like at work, is priced as a group and averages the older and younger employees or members, the healthy and the unhealthy and usually guaranteed issue. Note, this insurance only stays with you while you are employed or remain in the group.
Types of Private
Term – price remains the same for the amount during the term of years. After the term is up you need to requalify at your new age and health rating for a new policy.
Permanent – Price remains the same as long as you continue to make the premiums. There is a cash value component that builds up to compensate for the fact that you are getting older. The build up of cash value reduces the amount the insurance company pays in the end. But you intend to keep this until you die and it pays to your beneficiaries.
The reality is that you can buy a larger term policy for lesser premium expense. You can buy 10-, 20- and 30-year term policies. It is good to buy as much as you can afford especially when you have a house full of children. If you buy now, your income should grow through the years and the premium will not pinch so much. These term policies are only temporary, the term will run out and you will not want to pay the premium after the term is up. Too expensive!
While you are young and healthy and buying life insurance, I think it is good to have a combination of term and perm.
For example, if you are in your 20’s or 30’s and think you need $1,000,000 in life insurance on each spouse to cover your young family, you may consider something like a $900,000 term policy and a $100,000 permanent policy.
Having some permanent life insurance, like whole life, does make sense because it will be there past the term for new stages in life. I know Dave Ramsey doesn’t agree but I think he is wrong. There are many good reasons to still have life insurance later in life. If you purchase a whole life policy like I did at age 23 you will have a valuable financial tool with multiple uses and significant versatility. The cost of permanent insurance seems to be more, however when you consider that term insurance is like renting because it rarely pays out and permanent insurance is like ownership because you intend it to be in place all the way to the end of life and pays out it is actually less expensive when you do the math. Permanent insurance can also reach a status of “paid up” and no longer require a premium.
You can buy life insurance online or you can have an agent/financial advisor. Some agents broker or shop the market of different insurance companies, some agents are captive directly to the company they represent, like the person you buy your auto and home insurance from. You can also find a Christian Advisor who will help you with these decisions and many more at www.kingdomadvisors.com
Buying life insurance is an important and personal decision. Be sure to take it to the Lord and seek his guidance.
“Plans fail for lack of counsel, but with many advisers they succeed.” Proverbs 15:22
