Why Life Insurance

WHY LIFE INSURANCE? Because we care about our loved ones…that’s why!

By Jami Appenzeller

If you’re like me…turning 55 is really no different than turning 54, or 44…or…well, ya, it’s different than turning 34, I admit. But what I did find that is on my mind as my B-day is approaching, is are my kids “okay” if something were to happen to me. Where are they at, at this stage of their lives? My oldest son Derek and his wife Melanie need me, after all, to spoil their new baby boy rotten! (as well as save them money with the free babysitting of course). And Darion, my middle child…although incredibly independent, still not ready to be out on his own. This poor kid… takes after his mom…and is entrepreneurial in spirit and just getting his auto detailing business off the ground. God forbid if he needed to afford an apartment, and all those expenses that come along with it. My youngest, Savannah Love… well, she is only 13, need I say much more? We all know what is ahead of my (and my wallet!) So, this got me really thinking, is it time for ME to invest in life insurance for myself? Should Derek and his wife start thinking about acquiring some type of protect plan for their new family at this stage too? It feels like awful timing, I just left my ‘day job’ and took the leap of faith reinvesting in my own marketing company and publishing PhillyFIT Magazine again. Where is the extra income, at this moment, going to come from? But then again, I think I have always said that, and never felt I had the extra funds, so that means it was never really a priority. But it ought to be, and I wish I thought of this a few years ago. Well, let’s look at why protecting your family matters much more than the obvious:

Buying life insurance young can save you money over time. We really do need to learn why it may be smart to purchase life insurance in your 20s or early 30s, even if you don’t think you need it yet. With very few exceptions, the younger you are when you buy a life insurance policy, the less you’ll pay.

Although hundreds of factors determine life insurance premiums, age is one of the most critical components, and it makes a strong case for buying life insurance as early in life as possible.

Let’s consider the reasons why.

When a life insurance company considers an applicant, they focus on the risk the applicant is likely to make a claim at some point in the future. When it comes to life insurance, the ultimate risk to the company is the death of the applicant. (Obviously, that is when loved ones get the payout).

Another is the length of time that the policy is likely to remain in force. People can (and do) cancel life insurance policies at any time. So, the longer you hold a policy, the more money that the insurance company will earn.

This is important in regard to both whole life policies—which the company will ultimately pay out whether you die or not—but even more in the case of term life policies.

Term life policies have limited time periods (for example, 30 years). So, the obvious preference by the life insurance company is that you won’t die before the term expires. In that case, no death benefit will ever be paid out, and the premiums collected largely represent profit to the company.

That brings us back to the age factor, and why it’s a major component in the determination as to whether or not to approve a policy, and at what rate. The younger you are when you apply for a life insurance policy, the less likely it is that the company will ever have to pay a claim. That’s the goal. As a result, life insurance premiums are generally considerably lower the younger that you are at the time of application. Premiums will typically rise with age since the company has to adjust for the higher risk of death that increased age brings. However, your health will also play an important role in calculating premiums or becoming approved for a policy at any age.

Keep in mind, if you deal with an independent agent and he doesn’t get a good offer with the first company that he applies with, he can apply with many other Companies until he gets a fair and better offer. Hey, if you want to use my guy, hit me up (jami@phillyfit.com) I’ll give you his info. Hey may even buy me a free lunch for the referral :)

Good Example for my son and his wife to consider: Indexed Universal Life. This is great way to grow and start a savings, college education, or retirement account. For Example, $100/month payment will buy approximately $125,000 of life insurance for him at 33 years old and healthy. This covers a Chronic or Terminal Illness or injury. (The numbers are determined by age, health and amount you can afford.) If by the time Derek’s son goes to college, he can use this to pay for college.

If someone buys a life insurance policy for 20 years, the issue becomes what happens if you still need the life insurance after the 20 years has passed. So, at this point, when you try to reapply for new coverage at your older age, the premium goes through the roof and often this is where folks drop their policy. So, instead of buying a term policy, a Indexed Universal Life Insurance policy may have been the better way to go as it lasts a lifetime and there is no reapplying.