Since Term Insurance is for temporary needs, use it for amounts of money that would be needed now if you died, but that won’t be issues later. For example, yourmortgage will eventually be paid off, and the kids will in due course grow up and their education will be paid for, and the need to provide income until retirement to a non-working (or lower income) spouse will be lessened. These are perfect examples of initially large needs for insurance that will deplete over time, making them ideal for Term coverage.

In fact, you may need $500,000 of term insurance now to cover off your mortgage and anticipated educational needs for the kids, but in 10 years’ time when your policy expires, your mortgage will be smaller, and maybe your kids will be through college. You may still need some term insurance, but can get away with a smaller policy, saving money in the meantime.

Permanent Life Insurance (such as Whole Life or Universal Life), is for permanent needs. While this may seem simplistic, it is a fact that tends to escape many. Truth be told, permanent insurance needs are few and far between for many families. It is ideally used to cover off things like anticipated estate taxes which might be crippling, or leaving a legacy for children or charity.

There is also a forced savings investment component to permanent insurance that adds a tax-free benefit: After paying for a permanent insurance policy for a period of time, there will be a cash component to it that has grown and compounded tax-free. If, in retirement for example, you want access to this cash component, you can either make a withdrawal (or cancel the policy and get the cash), or you can borrow against this amount. Withdrawing or canceling the policy will involve paying tax on the growth of your investments, which can be cumbersome. But loans are tax-free; so if you borrow against the policy, you can gain tax-free access to money that has grown tax-free. You won’t have to make loan payments, because the insurance company will accrue the interest owing to the policy, which will continue to grow over time (since you didn’t actually make a withdrawal – you just borrowed against it), and when you die the loan will be paid back in full and any money left over is paid to your beneficiaries. Although there is a slight risk of the insurance company unexpectedly calling in this loan, you can decide if it is an acceptable risk.

It’s fairly easy to understand why we’re both concerned about our lack of insurance and yet still doing nothing about it — it sucks to think about life insurance.

While we may know intellectually that death is a 100% certainty for every single one of us, it’s awfully difficult to wrap our minds around. We prefer to think of ourselves as pretty darn invincible, even once we’ve gotten past the youthful, taking-ridiculous-risks age range.

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Life Insurance: How to buy it

Work with our TEAM to get the most affordable and a policy that really fits your needs

Don’t try to buy insurance on your own. It’s not worth it. It will ultimately end up costing you more in time, money, and possibly the ultimate financial security of your family.

Instead, consider using the services of an insurance broker or financial planner. Most brokers and planners will have access to bulk discounted rates from a variety of insurance companies – rates that you may not be privy to if you purchase it directly. They can also shop across the market for the product and rate that is best for you and your circumstances, and they understand how to equalize each insurance company’s unique jargon. Some insurance companies give preferential rates to males in their 40s (for example), but you would be hard-pressed to figure these idiosyncrasies out on your own.

But more importantly, a proper broker or financial planner will take the time to figure out exactly what type of insurance and what amount will be best for you. They will determine the answers to all the questions , and after talking with you and learning about your ideals and values, will recommend an insurance policy that is customized to your needs.

You could determine and calculate your Life Insurance needs, but it still would not suffice. And anybody who tells you otherwise is short-changing you on one side or the other: you’ll either end up short-changing your cash flow to pay for insurance you don’t need, or you’ll end up short-changing your beneficiaries by leaving them high and dry when they are most in need.

Do not take the selection and purchase of Life Insurance lightly. Find an expert who you trust and let them help you. You will end up saving money in the end.