Do you have enough Term Life Insurance?

Term Life Insurance is a necessity in most financial plans

Term Life Insurance is a must in most financial plans. Unfortunately, life can be brutal at times and we don't know whats around the corner. While it's important to see life as glass half full, we are not in control of everything around us.

Term Life Insurance is the payment of premiums during a defined period where the insurance carrier would pay a defined death benefit in the event of death of the insured.

Popular requests for Term Life Insurance are 250K, 500K, or $1,000,000. While those seem like high amounts, a deeper calculation is needed to determine how much coverage is recommended. Earning years left, number of children and their ages, monthly expenses, debt, future expenses, and spouse income are just some of the facts needed in order to find out how much money they will need in the event of a spousal death.

Example

Let's assume Couple X has a 20 year/250K in term life insurance and the following figures associated with their life:

75K Income for each spouse
16K car loan
Two children ages 5 & 7

If one spouse dies, the other would have a full-time income replacement of just over 3 years. At the end of those 3 years, they'd be left with a car loan balance, two children slightly older and zero second income. Clearly, their policy was nothing more than a bandaid. What they would really need is income replacement until both children are expected to be self sufficient. A better suggestion for coverage might have been a $1,500,000 death benefit, which would be 20 years of income replacement. This, of course, is an oversimplified version of this calculation but it shows how little a few hundred thousand would help a family of four in the event of unexpected death.

Not All Term Was Created the Same

Depending on the carrier, they may offer Accelerated Benefit Riders. This would be an add on to a term life insurance policy. As defined in Investopedia, Accelerated Benefit Riders pay death benefits to life insurance policyholders while they are alive. Benefits are paid to policyholders with a chronic illness, terminal illness, or who need long-term care and meet certain conditions. Of course, the policy will cost more money but it may well be worth it if you don't have a separate disability policy. Just to be clear, while budget is always a concern, typically a separate disability policy would cost considerably more than this add-on rider.

At the End of the Day

Every added expense makes each day a bit more stressful for a middle class family. That's why we need to prioritize our expenses and understand what is really needed and what is a waste. The younger Millennial generation can replace the cost of an online subscription or two with the long term security of their family.

If you'd like to explore term life insurance for you and your family today, please contact us per the information below. We are very responsive!

HLC Insurance Broker, LLC

201-575-1429

eric@HLCinsurancebroker.com

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How Millennials Are Missing The Boat On a Huge Financial Opportunity

14 Jan, 2021

An entire generation is missing the boat on the opportunity of a lifetime. In this world filled with uncertainty, Millennials are increasingly shaky on investing. Socking away money into a volatile stock market isn't as appealing as it once was. The advice of our parents, while still valid in many ways, may need a generational adjustment. The question is, how can we mitigate risk without sacrificing growth. The answer is Permanent Life Insurance. Particularly, Whole Life or Indexed Universal Life Insurance. This isn't the first thing you're taught about money, if you're ever taught it at all. Explaining these policies isn't the simplest thing to do, which means a lot of people don't understand them or care to put in the time to learn about them. This is leading Millennials to miss the chance at benefiting from Permanent Life Insurance, the same way the wealthy has for a long time. Depending on how the policy is designed and what carrier you decide to use, here are some Pros & Cons: Pros: Option to pay for a period of time Build Cash Value through dividend or stock market gains If you choose an Indexed Universal Policy, your market exposure cannot fall below 0% per year. Tax Free Growth & Withdrawals Can be used to pass wealth to beneficiaries Ability to loan cash from the policy WITHOUT sacrificing the growth of your cash value Defined OR Flexible Premiums Unpaid loans upon death will be subtracted from Death Benefit Great tool for "forced savings", the same way a mortgage is used Cons More expensive than term insurance Cash Value takes a while to build up If stock market return is 0% in an Indexed Universal Life Policy, fee's will still be charged. Dividends of a Whole Life Policy are not guaranteed, though you will not lose your principle. Of course, there are fees involved and you should understand what they are The reason this post is mentioning Millennials is because the premiums will only go up with time. The younger you are, the better rates you will get with a Whole Life or IUL policy. Don't be intimidated by these policies, which can be complex in many ways. And definitely don't make a decision without talking to your broker. The above bullet points are just a high level overview of the benefits and drawbacks of these policies. That being said, they can be an integral part of your financial planning process. While I don't advise they should be 100% of your investments or that you should dump your financial advisor, they can play a part of diversification and risk mitigation. Exciting stuff! What are your thoughts on Permanent Life Insurance??? Disclaimer: This article was written by a licensed insurance producer, not a financial advisor. Please, do not rely on this to make any financial choices without consulting a financial professional.