Wednesday, March 28, 2012

So What Do I Do?

Last Wednesday I discussed in depth the types of insurances that should be avoided.  Two of which are life insurance on a child and whole life or cash value insurance.  What I did not discuss in that post is what insurance you should get as an individual.  Term Life Insurance is the best option for individuals because it is has a low monthly cost with high amounts in case of death ($500k, $1million).  Depending on your needs you can get 10, 20, 30 year Term Life Insurance and depending on what you choose that is the time the insurance will be in place.  For example you can sign up for a 30 year $1million Term Life Insurance policy.  Most people ask me what if I live past 30 years what am I going to do then?  The point of the policy is to give you the cushion of insurance while you get out of debt and save up enough inheritance that when you do die which might be in 50+years your family will have enough money to bury you and still have money left over to distribute as you see fit in your Will.

Another concern that older individuals come to me with is that they think Term Life is only for younger people and that they would not be able to afford it.  I went on a popular insurance website quoted a 50yr old woman for a $500K 20yr policy in very good health for $85 in good health $93.  Also I looked up a 70yr old woman $100K 10yr policy in good health and it is $104 so it is doable.  All that you need to do is the homework and get the best possible Term Life Policy premium you can find.  Another question that I get asked on this type of insurance is how much should I insure myself for?  I always tell them at least 10X your annual income because this will allow your widow if you have one to invest the amount as well as live off of it.  Take me for example I have a $500k 20 year term policy because that is enough money to pay off our home, send both kids to college,  bury me, and still have more than enough to replace my annual income.  Everyone will have different needs so only you can make the decision on the policy needed.  If you are married each person needs to have a separate policy and a Will in place to execute your wishes.

The other insurance that you need to consider if you are 60 years old and up is Long Term Care Insurance.  What this insurance guarantees is that you won’t go broke after a couple years in a nursing home.  There are nursing homes that cost $40K+ a year and that price can definitely eat up a nest egg quickly.  Where couples run into problems is that the husband goes into the nursing home first uses up all the retirement savings and when it is time for the wife to go in usually after the husband has passed away there is no money left and she ends up in a Medicaid/Medicare nursing home.  If you have ever visited anyone in this type of facility you know it is somewhere you don’t want to spend your last years.  With Long Term Care Insurance you also have the opportunity to stay at your home for a short amount of time and someone can come in for minor tasks such as taking vitals for your physician, help with feeding, clothing, and bathing.  Once your health deteriorates to a certain point you will have to go to a nursing facility.  Long Term Care Insurance is vital for anyone over the age of 60 and should be purchased immediately.

After reading both posts on types of insurance what will you be doing differently so that your family is taken care of once you are gone?

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