What is the best type of insurance to own? How much life insurance do you need to own? How do you find someone qualified to answer these questions?
Some of these questions are very easy and others can get a little more complex and even overwhelming. We can start by addressing them one at a time along with a few others as well.
By far, the best type of insurance you want to own is the one that will pay out a death claim after you die. There is not much more to the basics of life insurance than this. Many advisors will argue about what type of insurance is better and I don’t really like to go down that road because it is usually a matter of personal preference based on personal circumstances however, I do like to educate clients or prospects that the best kind of insurance policy you can own is one that pays your family a check after you pass away. We all know the old saying too well, there are two things we know for sure; death and taxes and that is still as true today as it was many years ago when the constitution was amended to make taxes “permanent” (assuming it’s not changed again), this occurred back in 1913.
There are a few main types of insurance contracts that exist today and the bottom line is that you have two main types and then a few variations of those. Term insurance is the most basic and lowest premium you will see in the market today; they come in a variety of different lengths of contracts. For simple terms for this overview we will say that you have 10, 20 and 30 year term insurance options and the longer the term is level the more you pay for it. The shorter it is and the cheaper it is. The other basic type of coverage you have is permanent (whole life) insurance. This is type of contract that you pay a level premium and you have the coverage your whole life. There are some variations of these two contracts as well which are typically called either Universal life or Adjustable life (both are fixed insurance contracts). I would take the position that all three can be appropriate just depending on the circumstances.
The important question I wanted to really address today is the amount of coverage one should own. I would take the position that having insurance in the amount of 10-20 times your income is usually the most appropriate if you are under the age of 40 and you have a “need” for life insurance. If you have no “need” for insurance then it really depends on your circumstance and if you are retired then again, it depends. I have ran into several wealthy individuals that did not “need” coverage but it was appropriate for their wants and owned life insurance well into retirement and beyond.
The twist that they insurance companies have added to contracts in recent history is they are getting much more creative with the riders they are allowing to be added to life insurance. One of the ones that I like is life insurance with long term care added as a rider. I don’t want to get too detailed on this topic today but there are plenty of sources for this that I can direct you too if you would like. Please visit the contact page on the site and I will be sure to email you some good videos/PDFs that provide more information.
If you need to ask us any questions about any of these topics we are here to help. We are qualified to answer many insurance or investment questions that you may have. You can feel free to write us or call us with any questions and we will either answer them for you or find someone who can if we cannot.
