Term Life Insurance and Budgeting For a Policy
Term life insurance can be a low cost form of insurance coverage. Costs are based on a number of factors: your age, whether or not you smoke or use tobacco or nicotine products, height, weight and health/medical background. For the most part if you are young and in good health, clients I speak with are typically surprised about how much term life coverage they can purchase for what they feel is a low premium.
Instead of thinking it’s too expensive, let’s look at ways to plan and budget for term life insurance and take any guess work out of the equation.
STEP 1: Gather quotes: You need to have a starting point that gives you an idea of what the cost might be. Keep in mind quotes are estimates so they may not be the final premium a person is approved for. Many clients I work with gather quotes from 3 different companies. I feel this is a good rule of thumb as it will give you an idea if the insurance carriers you are considering are providing similar estimates or if they differ from each other.
STEP 1: Review your current budget: You need to look at where your money is spent and how much you end up with on a monthly basis that is discretionary. After the mortgage/rent and bills are paid how much money do you have to work with?
STEP 3: Factor the quote for life insurance into your budget: Now you take the term life insurance quote and subtract that from your left over discretionary money and look at where that leaves you for the month. Now that you have factored in a hypothetical term life insurance premium ask yourself if you are comfortable with paying that amount if you are approved for the premium as estimated.
STEP 4: Break down the cost of the term life insurance: If you divide the monthly premium by 30 what does it come out to for a cost on a per day basis? Think of it this way do you buy a coffee every morning or at least Monday through Friday? Let’s say I’m paying 2 dollars a day for a medium coffee and based on 4 weeks in a month that comes out to about $40 a month. This is a good practice to help understand that all those small purchases we make add up over time. So take some time to look at your spending and if need be look at areas where you can cut back to help make the term life insurance policy a reality.
STEP 5: Monthly payment option for term life insurance: For monthly payments insurance carriers will deduct the payment from a bank checking or savings account. This way you don’t have to worry about writing a check and remembering to mail the bill. With monthly payment you know it will happen automatically and most times you can choose a day of the month for the withdrawal to come out.
As you shop for term life insurance think of the steps above. Take some time to sit down, go over your budget and then give me a call so I can run some quotes for you. Then you can compare with any other quotes you have and make an informed decision about what you feel is best for you and your budget. Remember, term life insurance is there to provide for your loved ones should you suddenly pass away. No one I speak with plans on passing away any time soon but it’s the what if that we have to worry about? Is my family protected?
About the author: Dan Cody has been in the life insurance business for over 7 years. He loves playing a variety of instruments including the guitar, bass, drums, and piano. He also supports cancer research foundations and volunteers at local pet shelters. Dan enjoys helping customers understand life insurance, so they can find a solid policy that fits their needs. You can reach Dan at 1-800-651-1953 or DCody@Pivot.com.