After months of planning it down to the minutest detail, the day you have been looking forward to is finally here…and in just a few short hours, it’s all over. Now the first day of the rest of your lives together begins.
This new life together brings with it much joy as well as many new responsibilities including increased financial obligations such as a car loan, a mortgage and children.
That’s why developing a sound financial plan, which includes adequate protection against life’s unforeseen risks, is extremely important. Life Insurance completes the family insurance portfolio.
Why do I need it?
Life Insurance provides peace of mind. It also enables us to show our love. As love is not selfish, we are moved to protect our spouse. When considering the promises you are making to each other, “til death do us part”, love moves you to provide and care for each other even beyond death.
According to the 2011 Bermuda Digest of Statistics, 619 couples got married in 2010. Fifty per cent of these newlyweds were between the ages of 25 and 34. This is the ideal age to obtain life insurance. Younger people normally receive better life insurance rates because they are considered a lower risk for an insurance company.
How much do I need?
The various experts recommend that you insure yourself for anywhere from five to 20 times your annual income. With that as a starting point, how do you determine if you require $100K, $250K, $500K or more in life insurance coverage?
The best way to figure out what you need is to ask a life insurance professional to conduct a financial needs analysis. Start by gathering all your personal financial information and estimating how much your spouse will need to meet their financial obligations.
To calculate this figure, think through these three types of expenses: Immediate – funeral costs, uncovered medical costs and outstanding debt such as car loans and credit card debt.
• Ongoing – money for your family to live on for a specific time period to help pay for everyday living expenses such as food, utilities, mortgage/rent, transportation and health care.
• Future – children or college savings plan.
What kind do I buy?
There are two fundamental considerations that go into answering this question:
1) How long will you need the insurance, i.e., should it be term or permanent insurance?
a. Term insurance last for a specific period of time — 5 years, 10 years or maybe 30 years
Advantage — good for temporary needs and it is affordable.
Disadvantage — rates increase with age; you must re-qualify when term expires, so insurability becomes a factor.
b. Permanent insurance — This is with you for life. The premiums are projected to remain level over your lifetime and in some cases can be designed to stop at retirement while your coverage remains in force for life.
Advantage — Lifelong coverage; premiums are often level for life; accumulates cash value.
Disadvantage — more costly than Term when initially purchased.
2) How much money do you have in your budget for this expense?
Where do I purchase life insurance?
Life insurance is a long-term investment/commitment. Therefore, you should research the company you are contemplating as your life insurance provider.
Here are five things to consider before you make your purchase (listed in order of importance):
• Financial stability and rating.
• Suitability of products.
• Customer service.
• Claims ethics.
• Premium cost.
Rather than thinking of life insurance as an extra burden, a couple should consider buying a policy for one another as a sign of their commitment to one another to show that your desire is to take care of your spouse, even when you’re not there.