Are You Gambling Unintentionally?
Ten years ago I ventured to the Bahamas aboard a cruise ship with one of my friends. Over our week vacation I enjoyed playing (and winning) in the ping pong tournament and contending (and losing) in the singing competition.
One night my friend and I met a gentleman who told us that he used to have a gambling problem, and hadn’t gambled in the last decade. After returning from our shore excursion, we noticed a huge crowd around someone at the blackjack table. Low and behold, it was the gentleman we met earlier in the night, who I later found out was down $50,000!
Most of you would never put yourself in a position where you could potentially lose $50,000 at a casino. However, according to a national study, 41% of Americans do not carry any form of life insurance. If those individuals were to die before retirement, far more than $50,000 is at stake. For every year thereafter, there is a lost year of income for their family and loved ones.
"Not having life insurance is like being left in a public bathroom without toilet paper." -Anonymous
You always want to make sure you have adequate life insurance. I personally think Term Life Insurance is far better than Whole Life Insurance (defined in next paragraph); it’s so much cheaper, provides far more coverage, and is more suitable 9 out of 10 times.
In the simplest sense, Term Life Insurance covers you for a period of time (a term) usually 20 or 30 years. Whole Life Insurance covers you for your whole life. Most of us don't need to be covered after we retire because there is no income to replace. If an insurance agent or financial professional is suggesting Whole over Term, there needs to be very good reason for it. Remember to run this by a fee-only advisor who is required to provide objective financial advice in your best interest.
When it comes to life insurance the #1 question I get is whether to purchase Term Life vs. Whole Life. Now that you know my thoughts, lets skip to the second most common question: "How much life insurance should I buy?"
A good rule of thumb is 10 -15 times your annual income. Of course this is going to vary depending on your needs, but that range is usually a good starting point to begin discussions. A nice perk of life insurance is that it is generally tax-free. So if you have a $1,000,000 policy and receive the payout, you typically don't owe any taxes to Uncle Sam.
If you are thinking about life insurance a good place to start is a site called, Policy Genius. I tell people it is like the Expedia of insurance where you can compare and buy policies online.
As always, please feel free to call or schedule a meeting if you would like to further discuss how this may fit into your overall financial plan. I would encourage you to not take a gamble on your future, and start exploring life insurance, if you haven’t already.