Life insurance do you really need it Канада


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Life Insurance — Do I Really Need It?

This is the first of many blogs that I will be writing about insurance as I feel insurance is one of the most complex products.

I have been working in the insurance industry for over a decade and have had the opportunity to work on the insurance products in different markets across the globe. One common theme I have seen is that insurance as a product is mostly “pushed” rather than “desired”. One would wonder why this is the case if insurance serves a noble purpose of protecting people from uncertainties!

Moreover, with so many different types of insurance available in the market, at times it is confusing to pick out the insurance that is right for us. In this series, I will be talking about:

  • Should I buy a life insurance?
  • When should I buy a life insurance?
  • Which insurance policy should I buy?
  • Where should I buy insurance?

A brief history of Insurance

Insurance dates back to early human society where insurance meant agreements of mutual aids among the families, under this arrangement one family would help another in times of flood or famine. These agreements were non-monetary in nature and no cash transfer happened between the families. Then came the age when insurance was purchased by traders who required protection against piracy or lost merchandise. The idea of life and health insurance was first introduced by Greeks and Romans. Insurance since has evolved into a very complex product and a number of different category of insurance products such as life insurance, health insurance, property insurance, motor insurance are easily available today and provides protection against different circumstances.

Modern day Insurance industry is heavily regulated especially in developed countries such as Singapore. Monetary Authority of Singapore (MAS) plays an important role in protecting the interest of the customers by ensuring that insurance agents and banks selling insurance policies operate in a very transparent manner and provide sufficient information to customers to aid an informed decision. However, there still is an inhibition in the mind of people regarding the insurance and the way it is sold.

So, it is natural for people to ask why buying insurance is a good idea.

As soon one gets out of college and starts earning, he is likely to bump into an insurance agent or get a call from his bank convincing him to buy insurance. Some insurance plans insure a child even before he is born! The question really for me is how we know whether we really need an insurance policy and the answer is not simple. It starts with an analysis of the purpose and extent of protection required, current wealth, lifestyle requirements, and future financial goals.

Let’s discuss these one by one.

Protecting our loved ones

Insurance in its most basic form is bought for protecting the survivors of the insured (family members) from unfortunate events such as death or disability of the bread winner. There are insurance plans that offer protection in the event of death, or diagnosis of a critical illness or in the event of disability of the person insured (bread winner).

In addition, there are health insurance plans which offer support when a person incurs high medical expenses. Albeit Singaporean residents do get protection from their CPF accounts, they may require higher protection depending on the lifestyle requirements.

Number of dependents to a great extent determines how much protection we need.

Current wealth

Interestingly the amount of insurance required is proportional to the current wealth. Someone with limited means and leading a frugal life may not have enough resources to afford insurance while someone with significant wealth is likely to seek protection and avenues to grow it further.

The former set of people is most likely to be supported by the State in many countries. For example, in Singapore, people can rely on their CPF for protection with MediShield schemes. The latter set of people does not really need insurance but there are high net worth insurance plans in Singapore which help these people with legacy planning. It is the people in the middle of the income / wealth range who really need to ask the question if buying insurance is the right use of their money and if they really need the insurance. That brings us to the next factor, lifestyle requirements.

Lifestyle requirements

Lifestyle requirements define spending levels and monetary needs. For example, needs of a young family revolves around mortgage and children’s education whilst the consideration for elderlies would be to save enough to survive the old age.

Whatever the need be, lifestyle defines how soon one needs to start planning and whether one can meet their financial goals in time. A simple calculation needs to be performed on our regular savings and projection of our accumulated wealth in certain number of years. If we believe that the current wealth is enough to meet our financial goals, we probably do not need insurance.

Financial goals

Let’s talk about our last factor around our financial goals. Many of us often use insurance for meeting some of our financial goals, for example, saving for our children’s education or for our retirement (I already spoke about this in lifestyle) or for that big house. One important aspect is to consider whether we are buying insurance because we want to be disciplined about savings or we really think that insurance will help us save in a cheaper way than the other financial instruments such as bank deposits or investing in equities.

There are insurance plans out there which do not provide guaranteed returns but are still perceived as guaranteed products and consumers need to be careful whilst buying these plans.

Overall, this blog talks about factors that we need to consider when deciding when we need insurance. In the next blog, I will talk in some detail about when we may want to buy a particular type of insurance.

Do I Really Need Life Insurance?

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Is Life Insurance a Good Idea?

Hannah Boykin’s parents didn’t think so.

And tragically, both of them passed away within 14 months of each other, leaving 6 kids behind (mostly teenagers) with no financial support.

The children were devastated, not just because they lost both of their parents, but also because they had to be split up. No one in the family could afford to take all of them at once.

Term Life Insurance is extremely affordable. I recommend 10-12x your income over 20-30 years. Get a real-time quote here.

We heard about Hannah’s tragic story when she applied for our scholarship. Hannah is extraordinary in that throughout this experience, she still managed to graduate at the top of her class in high school and start a nursing program.

…but after being split up from her brothers and sisters, and suffering the effects of zero financial support in college, I can’t help but wonder how things would have been different for her family if life insurance had been in the picture.

I tell that story not to scare you into buying life insurance but to show that death can not only be unexpected, but it can also have a lasting impact beyond the loss of a loved one.

Fortunately, there’s a simple and affordable way to prevent Hanna’s story from EVER becoming your family’s story… life insurance.

Table of Contents

Do you really need life insurance?

The short answer is, most likely yes.

If you rent or own a home, and can’t answer the question, “Where would my family be living 1 year from today if I suddenly died,” you need life insurance. (HINT: The answer should be in the exact same place they are living now.)

In fact, if anyone in your family at your workplace relies on the income (or services) you provide, and would be impacted financially by your death, you need life insurance.

Related: See how low rates are for Term Life Insurance right now

According to LIMRA, the top four reasons people buy life insurance are as follows:

  1. Cover burial and other final expenses
  2. Transfer wealth or leave an inheritance
  3. Help replace lost income
  4. Pay off a mortgage


Between all of these, most people are covered. Let’s take a look at each one in turn:

#1 – Cover burial and other final expenses

Whether or not you have people depending on you financially, you can’t escape these expenses.

…funerals and burial aren’t cheap either, running about $11,000 on average.

A guaranteed universal life plan for that amount is fairly cheap, costing less than $20 in many cases, so don’t leave it up to your family or GoFundMe to foot the bill.

You can request a guaranteed universal life quote by clicking here and selecting the “Lifetime” option under the “term period” dropdown.

#2 – Transfer wealth or leave an inheritance

If you’re independently wealthy, you might think you don’t need life insurance. But if your estate is worth more than $5.49 million (or $10.98 million for married couples) in 2020, you’ll pay a staggering 40% federal estate tax on the amount above that threshold.

Having enough life insurance to cover those taxes means that Uncle Sam gets less of your money and your heirs get more.

Just make sure your life insurance benefit is paid out correctly. If not, it could be included in your estate and be considered taxable. Read this article to learn more.

If you’re not independently wealthy but still want to leave something for your kids, you can still do it.

For example, let’s say a 65-year-old man earning $50,000 a year on his pension wants to leave $150,000 for his three children to divide up.

Assuming he lives until age 80 and gets a 5% return after tax, he’d have to set aside $6,951 every year to make that happen.

On the flip side, if that same man is in good health, he could get a guaranteed universal life policy that would pay out $150,000 for as little as $3,065 per year.

…that’s less than half the cost.

Plus, he doesn’t have to save until age 80 to make it happen. If he were to pass away the next week after purchasing life insurance, his heirs would still get the full $150,000.

The best way to cover an estate planning need is usually with guaranteed universal life. It costs on average half what whole life insurance costs and offers guaranteed coverage for life. You can request a quote by clicking here and selecting the “Lifetime” option under the “Term period” dropdown.

#3 – Help replace lost income

At the outset, I asked, “If you were to die tomorrow, where would your family live a year from now?

How about 3 years? Will your spouse still be able to make rent or mortgage payments? Will your kids still be able to do sports or other extracurricular activities?

If you’re the breadwinner in your relationship, losing your income could limit your family’s future, especially if you still have 2 or 3 decades left in your working career.

Term life insurance is the best way to cover lost income. It’s cheap and flexible. For example, a 35-year-old male in good health could get a 30-year $500,000 term policy for as little as $38 per month.

…you’re not stuck with 30 years either. You can typically choose between a 10-, 20-, 30- or even 40-year term.

#4 – Pay off a mortgage

Debt can weigh you down in any financial situation, but more so when you’ve just lost a loved one.

That’s why a lot of people get life insurance help their spouse pay off their biggest debt — their mortgage — in case they die prematurely.

…but what about other debts?

Basically, you might want to consider getting enough coverage to pay off any debt that both you and your spouse hold. Again, it’s not about getting rich. It’s about preserving your family’s way of life.

3 tips to help you get started

As you can see, there aren’t many situations where you don’t need life insurance.

So, to help you get started on the right foot, here are three tips:

#1 – How to buy life insurance

Work with an independent agent to make sure you’re getting the best deal on your life insurance.

…you’ll know if an agent is independent if they’re offering you quotes from several different insurance companies.

If they sell insurance from just one company, you’re likely not going to get the best deal out there.

You can usually get free quotes online and then go from there.

#2 – Use these ways to save

There are several ways to save on life insurance, but here are the top three:

  1. Pennies from Heaven strategy – Instead of choosing a policy with a lump sum payout, opt for one with an income option. This can save you 10% to 30% while still offering a steady income. This is a proprietary savings strategy we use at Huntley Wealth, so if you’re interest in this strategy, request a quote here and tell your agent to show you the Pennies from Heaven quotes.
  2. Lose a few pounds – There’s a 25% price difference between health classes, and in many cases, they’re separated by only a few pounds or a few cholesterol or blood pressure points. Take a week to exercise and eat well to improve your health prior to applying for coverage, and you could save 25% to 50%.
  3. Do the medical exam – No-exam life insurance sounds tempting — who else hates needles? But these policies cost 10% to 40% more because the insurance company can’t assess your health risk as well. So, unless you have major health problems or have an urgent need for the coverage to take effect, take the exam.

Read this article for more ways to save on your life insurance policy.

#3 – Watch out for the hard sell

Life insurance agents make money when you buy a policy from them.

…so naturally, there’s a conflict of interest.


If you ever feel uncomfortable about the way an insurance agent approaches the sell — especially if he or she is spending a lot of time on expensive whole life insurance — don’t walk …run to your nearest exit.

It’s Hero Time

We all believe we’re invincible, but the fact of the matter is that unexpected deaths happen all the time. What’s more, life insurance gets more expensive as you get older.

So it’s time to make a choice…

If you want to be able to protect and provide for your family (even if you’re not here), you can click here to start with a free quote right now — It literally takes less than 1 minute!

I know… that’s some bigtime superhero, life-after-death talk right there, but I’m being serious.

The alternative is to leave your family’s well-being in the hands of chance, who could face serious obstacles without you.

To achieve instant “hero” status, make sure your loved ones are protected, and punch death in the face, click here now.

Life Insurance in Singapore – The Basics of Whole Life and Term Insurance

This whole insurance thing really does take a while to wrap your head around. The words “whole life insurance” and “term insurance” don’t really mean or explain very much to the average person.

The typical Singaporean is also trained from a young age to run away from people who want to have such conversations with you, as if they were infected zombies. Still, at some point in your adulting, you come to the dreadful realisation that insurance is not avoidable for ever and that there is value to getting at least some sort of life insurance policy.

We’re here to arm you with some basic knowledge before you face an insurance agent, so you know what you’re getting into.

Contents

What’s the difference between whole life and term insurance?

An insurance policy provides protection for financial losses suffered from a particular event. In the case of life insurance, the “event” is the loss of your life, or in the case of total permanent disability (TPD). To put it simply, a life insurance policy is designed such that if you die, the insurer’s payout should be enough for your dependents to live on when you are gone.

But before you buy any sort of life insurance, you need to decide whether you will opt for whole life insurance or term insurance. What’s the difference between them, and which is right for you?

Term insurance Whole life insurance (endowment) Whole life insurance (investment-linked)
Main objective Protection Protection + potential to grow savings Protection + potential to reap investment returns
Coverage Most plans cover death and total permanent disability (TPD)
Coverage Period A specific term period or up to a specific age Usually up to end of life Usually up to end of life
What is paid upon death of insured? Sum assured Sum assured + accumulated bonuses if any Sum assured + value of units in fund
What is paid if policy is surrendered early? Nothing, since there is no cash value Cash value (guaranteed + non-guaranteed bonuses if any) Value of units in investment sub-fund

Both term and whole life insurance provide protection in the event of total permanent disability (TPD) and death. The two main differences between them are: (a) how long the policy will cover you and (b) how much money you get back if nothing happens to you.

Term insurance provides you with protection only for a fixed period of time, say 20 or 30 years, after which the plan expires. If nothing happens to you and you don’t make a claim, you get nothing (apart from a letter thanking you for giving them money for the last 30 years).

This type of coverage is cheaper, and it makes sense if you plan to provide for your dependants for a limited time. For example, until your youngest child finishes tertiary education.

On the other hand, whole life insurance covers you till the end of your life, as long as you continue to pay the premiums.

It’s much more expensive, but it has the potential to grow the money you paid. The potential growth varies depending on whether your whole life insurance is an endowment plan or an investment-linked policy (ILP). More on those in the next section.

In either case, the “advantage” of whole life insurance over term insurance is that, even if you terminate and surrender the policy, you can get back some of the monetary value.

Endowment vs investment-linked whole life insurance policies

In Singapore, whole life insurance usually includes a savings or investment component, named endowment and investment-linked policy (ILP) respectively.

Due to these features, some people see their whole life policies as an investment/savings plan instead of just being a plain old protection plan. These added features make whole life insurance more expensive than term insurance.

Endowment Policies

Endowment policies are often seen as a way to help you build up financial discipline since the savings component is built into the monthly insurance premiums.

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For instance, let’s say you pay a monthly insurance premium of $250 for your endowment policy. Of this amount, $100 might go into the insurance protection component, and $150 will go into the savings component.

After a fixed period of say 20 years, you will be able to get back some of the cash value accumulated, depending on the guaranteed and non-guaranteed benefit of your policy.

Investment Linked Policies (ILP)

For an ILP, the savings component will be replaced with an investment component where part of the premiums go into buying units in investment funds.

Unlike endowment insurance policies, ILPs usually do not come with guaranteed values. The value of the ILP depends on the performance of the fund you’ve bought into. So yeah, you could get zilch if things don’t go well and this represents a potential opportunity cost as you could have made that money work somewhere else for you.

Some consumers like ILPs because they like the idea that they can invest and have financial protection through a single financial product. There is also have a range of funds to choose from that suits different investment objectives and risk appetite.

Whether you choose to buy a term insurance, endowment plan or ILP, the main thing is to decide if your choice fulfils your financial objective and takes into consideration the long-term costs involved.

Let’s compare the premiums for whole life vs term insurance

While life insurance used to be the “go-to” insurance for most people, with increased financial literacy, more people are open to getting term insurance instead.

One of the greatest advantages of choosing a term insurance instead of a life plan is the substantial savings you get from lower premiums. So if you know you need insurance protection but are in a phase of life where you can’t afford setting aside very much every month, this becomes the best choice for now.

Here’s a simulation of how much insurance premium a person will pay for life and term insurance based on the following criteria: 35-year-old man, non-smoker with sum assured of $500,000. Let’s call him Mr Siva.

Type Life insurance policy Annual cost Total amount paid
Term FWD Insurance Term Life $510 $510 x 30 years = $15,300
Term Great Eastern Max Term Value $840 $510 x 30 years = $25,200
Whole life NTUC Limited Pay Protection $10,038 $10,038 x 29 years = $291,103
Whole life AXA Life MultiProtect $13,440 $13,440 x 30 years = $403,200

As you can see, the difference in the amount of premiums paid between term and whole life insurance is huge.

This is why some financial advisors even advocate “buy term and invest the rest”. In other words, buy a term policy for the necessary protection, and then use the money you didn’t use to invest. This is a strategy that has the potential to grow your money if you make the right investment decisions.

On the other hand, some consumers like to get a whole life policy because it offers some cash value should you decide to surrender the policy.

Based on the guaranteed surrender value (after 30 years) for the above whole life policies, one can expect to receive $246,000 and $307,000 for the NTUC and AXA plan respectively. Using these values, it means that the total premiums paid for your whole life policy will be reduced substantially this brings it more on-par to term plans in terms of cost.


One important consideration when choosing to take up a term plan is that the coverage term may expire at a time where you’ll continue to need protection (or need it most).

For the above case, the term plan will expire when Mr Siva is 65 years old. Depending on his situation, Mr Siva may want to continue getting life insurance coverage for another 20 years.

However, depending on his health at 65, some companies may consider him “uninsurable”. Even if he does qualify for a new insurance plan, premiums are going to be very expensive at that age, and he may not be able to afford them during his retirement years.

Who should buy whole life insurance?

While it may seem that the “buy term and invest the rest” mantra makes total economic sense, there are instances where buying whole life insurance can be a better choice.

Whether you need life insurance really depends on your stage in life. If you are a young 20-something with no dependents and limited obligations, you’ll likely not need a whole life insurance policy.

But say you are 40-year old, and the sole breadwinner in a family with two young children and elderly parents. In such a case, whole life insurance can help to provide financial protection for your loved ones while simultaneously helping you build up some retirement funds for your golden years.

Life insurance coverage is a way of caring for your family, because you don’t want them to suffer when any misfortunate befalls you. In a survey by NTUC Income published in April 2020, 48% of 329 married adults surveyed expressed that they were motivated to buy life insurance because they want their loved ones to maintain the same standard of living when disaster strikes.

The other situation where whole life insurance can make sense is for your young child. You might think, “why would my 2-year old need whole life insurance?”

For one, it guarantees insurability and no-exclusions since most young children have a clean bill of health. Many parents also take up a whole life policy with endowment plan in order to start saving for their child’s future education. Also, your child is likely to enjoy lower premiums when getting insured from a younger age.

If you’re getting a whole life policy for a child, choosing a limited pay option can be a good idea. Your child can get a life-long coverage with premium payments for as short as 12 years. It can thus be a meaningful gift for a young child instead of saving money in a bank deposit account that cannot beat inflation.

How does “limited pay” work?

Getting a life insurance with limited pay period means you only need to pay premiums for a limited number of years in exchange for a lifetime’s coverage.

Say for instance, Andy (male, non-smoker, age 35) decides to make premium payments of S$250 per month for only 15 years for his whole of life plan up till age 50.

For the next 15 years, Andy pays about S$45,000 for a sum assured of S$100,000. The insurance coverage will continue for rest of his life even after he ends his premium payment at age 50. Depending on his insurer and plan, he will likely also be entitled to some accumulated cash value if he surrenders his policy when he reaches 65 years old.

What is this “surrender value” thing?

When you buy a life insurance, you have a surrender right – the opportunity to terminate your life insurance contract in exchange for its cash value. You can only do this if you’ve not made any claims before.

When you choose to surrender your policy, you will give up the remaining coverage while your insurer presents you with a cash surrender value, which is how much money you will receive in return.

Do note that the surrender value of your policy will be lower than the death benefit payout. This means that you will receive less money by surrendering your policy as compared to having the death benefit when you pass on. Thus, it is often not advisable to surrender your policy. Not only will you lose out in terms of monetary value, but taking up a new insurance policy at a later age will probably incur a higher premium payment.

Ultimately, there’s no right or wrong in choosing whether to get a term plan or whole life insurance – it all depends on what you need and how much you can afford.

Whole life insurance costs more, but it can be a convenient option for those who want both financial protection as well as a savings/investment component. On the other hand, a term life insurance plan offers a great cost-effective option for those who want (only) pure protection.

What are your thoughts on buying life insurance? We want to hear from you.

Is Life Insurance Really Worth it?

Updated September 13, 2020

Some of the links included in this article are from our advertisers. Read about how we make money.

No one wants to think about the bad “what ifs” in life, but no one wants to leave their family financially shattered if something unexpected happens either. So the question you need to ask yourself when deciding if life insurance is right for you is “Is life insurance worth it?”

Tip: A quick and affordable way to get term life insurance is through Bestow. There is no medical exam required.

Table of Contents

Do I Really Need Life Insurance?

This is a question I get asked a lot. The short answer is it depends. Everyone who is not self-insured should have life insurance – especially if you’ve got a spouse and kids who depend on you. If something unexpected happens your family is going to need stuff, and they’re going to need money to pay for that stuff.

If you’re self-insured you don’t necessarily need life insurance, but before I talk about what it means to be self-insured, let’s talk about the other insurance question financial experts get asked a lot.

Should I Buy Whole Life Insurance or Term Life Insurance?

If you’re not self-insured, getting a life insurance policy is a smart money move. If you’ve decided that a life insurance policy is a smart move for you, the first step you’ll have to take is to begin the fun task of shopping around for rate quotes.

Not all insurance companies are the same, so they don’t all charge the same rates. This is why you need to shop around in order to get the best deal on your policy. As you shop for life insurance, one of the first questions you’ll be asked by insurance agents is whether you want whole life insurance or term life insurance.

Whole life insurance policies last throughout your whole life, or up to age one hundred twenty. Term insurance policies last for a specific term. Personally, I’m a big fan of term life insurance. Term life insurance costs less and generally covers policyholders for a twenty-year term, which is long enough to get the kids grown and out of the house and to make a financial plan that allows you to become “self-insured.”

So that’s my first piece of advice: if you’re going to buy life insurance, stick with term life insurance. Whole life insurance isn’t necessarily the smartest money choice and isn’t usually necessary for most people.

If you decide you need a policy, shopping around for the best price can be a lot of work, so you might want to call a company like Policy Genius that takes your information and does the shopping for you.

The difference in policy rates can be pretty substantial and you don’t want to spend more than you need to on your policy when you could be putting that extra cash toward wealth building.

Now let’s get back to the subject of being self-insured.

What Does It Mean To Be Self-Insured?

Being self-insured means you’ve got enough money to pay for final expenses and to support your family financially for the long-term if something unexpected should happen.

Being self-insured generally consists of having reached a couple of different financial goals.

You’re Completely Debt Free

Part of being self-insured is having all debt – including your mortgage – paid off, or at the very least having enough cash in savings and investments so that you can pay off all debt and still have plenty of money to cover your family’s living expenses for one to two decades or more. If you have debt, you still should consider buying life insurance.

You Have Substantial Savings and Investments


The other part of being self-insured is having a large dollar amount in savings and investments. By “large”, I mean enough to cover all basic and potential extra living expenses for at least ten years, preferably twenty to thirty years.

If you’re debt free, this should be a pretty easy number to calculate. Just take your family’s basic living expenses each month, add a ten to twenty percent buffer for unexpected expenses, and times the monthly number by the number of months you want your family to have financial coverage for.

For instance, if your basic monthly living expenses were $2500, and you wanted to have enough cash to cover your family’s expenses for twenty years, you’d take that $2500, add a twenty percent buffer, bringing the number up to $3,000 per month. Times that by twelve (the number of months in a year) bringing the total number to $36,000 per year. Times that number by twenty (for the number of years you want to be insured) and you would need $720,000 in life insurance policies or $720,000 in savings and investments in order to be self-insured.

Times that number by twenty (for the number of years you want to be insured) and you would need $720,000 in life insurance policies or $720,000 in savings and investments in order to be self-insured.

That’s a lot of cash, which is why having a sufficient life insurance policy is so important to your family’s security as you work toward becoming self-insured. If you’re close to being self-insured, don’t panic and run out and buy a policy. If your goal is $700k but you’ve “only” got $500k in savings and investments with little to no debt, your family is likely still in a pretty good financial situation, even if your income is taken away.

The point is that in order to consider yourself self-insured to where you don’t need a life insurance policy to cover expenses, you need to have a pretty substantial amount of cash socked away.

It’s not always fun to check out getting a life insurance policy, but it’s a good product to have in the interim as you work your way toward financial independence.

How Much Life Insurance Should You Buy

A typical rule of thumb is 10 times your current annual salary. For instance, if you make $50,000 per year, then you should have at least $500,000 in life insurance. However, everyone’s situation is different, so here are some things to consider.

How much debt do you have?

If you have a mortgage, credit card debt, or even a car loan, these things could change how much you need.

Consider this scenario:

  • Mortgage: $200,000
  • Credit Cards: $10,000
  • Car Loans: $30,000

This comes out to $240,000 of debt. So you may want to consider adding your debt total to the 10x rule. So if you make $50,000 then you would want $740,000 in term life insurance ($500,000+$240,000). Make sense?

How many kids do you have?

Kids are great, but they can be expensive. Keep in mind, the idea of life insurance is to provide for future income needs for your spouse and your children.

Here are some things to consider:

  • Do you want to pay for them to go to college? Maybe factor in about $40,000 per kid.
  • Do you want to pay for their weddings? Perhaps, consider $20,000 per child.
  • Do you need to pay for daycare costs if something were to happen to you? This could be a big one, depending on the age of your kid and the area you live in.

Obviously there are many more things to consider when factoring in kids, but this should give you an idea of what future costs to consider when purchasing life insurance. So lets say you have two young kids and you want to pay for all three of these.

So you would want an additional $120,000 plus whatever daycare costs might be. Lets say another $96,000 ($24,000 times 4 years).

This would bring the grand total to $956,000 ($740,000+$120,000+$96,000).

If you want a say in what happens to your family after you’re gone, a will is a great place to start.

My Personal Experience with Insurance

For the longest time, I hated paying for insurance. It seemed like a waste of money. You pay a company a monthly fee just in case something were to happen. And life insurance, do I really need it?

I remember when I got in my first car accident. I was delivering pizzas in college and a car in front of me decided to make a left turn immediately after passing through a green light. It wouldn’t have been as big of a deal, but the guy did not pull all the way into the center lane. This left the right rear of his bumper still in my lane.

I thought about moving over one lane, but there was a car on the other side of me so I couldn’t. I ended up clipping his bumper and doing everything I could to not hit another car.

At that moment, I was flooded with emotions of fear and anxiety.

I was just a college student, how I was I going to pay for the repairs?

I had never had $1,000 in a bank account and even paying for things in college was a struggle; that is why I was delivering pizzas in the first place.

Between the two cars, the cost was thousands of dollars.

Well, thankfully I had car insurance, so they paid the guy directly for his damages. I decided not to get my car fixed because I still had a thousand dollar deductible.

Why do I tell you this?

Because if I did not have insurance, I would have had to pay everything out of pocket with money I did not have. This is why insurance is so important. The whole point of insurance is to transfer risk from you to someone else in the case unexpected events happen. Whether it be a minor car accident or a tragic accident that changes the course of your life forever.

This is where life insurance comes in

When I got married, I realized that I was now responsible for not just me but my wife as well. I want to make sure that she is taken care of which includes her financial well-being. Then fast forward some years, we now have a newborn baby girl and a two-year-old boy. So not only am I worried about my wife but now my two kids as well.

If something happened to me, I asked myself:

‘Would my wife have to work three jobs just to keep things afloat?’

‘Would my kids be able to go to college without being saddled with student loan debt?’

‘Would they be able to live in an area where the schools are good and get a quality education?’

‘Would they have to downsize from a house to an apartment?

‘If so would they have to get rid of the dogs?’

‘Who is going to raise my kids if my wife is working three jobs’

Have you ever asked yourself these questions? Or maybe similar questions about how your family would be affected if something were to happen to you?


These questions were enough to motivate me to find out how to protect my family if anything were to happen to me. When I started to do my research, I found that there are two main types of life insurance: term and whole. I found that whole life insurance is high in fees and is more of a permanent product where term life insurance is very low-cost and for a selected period of time.

Why I went with term life insurance

My goal is to become self-insured where I have enough money to take care of my family without needing life insurance. However, that will not happen overnight. We have a mortgage that we plan to pay off in the next five years and we do not have much in terms of investments at this time, so we need a short term solution. And by short, I mean twenty years.

There are many companies that provide term life insurance and I found the best way to get a quote is through using a tool called Policy Genius. They don’t sell life insurance themselves, however, they will get you real-time competitive quotes from several life insurance companies, some you already know and some you probably never heard of.

Literally, within 2 minutes you can get a quote like I just got below:

This is for A $500,000 life insurance policy for twenty years for less than $25 per month. Most people spend that eating out just one time per week!

Why do we pay to insure things like our homes, cars, heck even airline tickets or shipping things in the mail? But we don’t put a priority on protecting the things that matter most.

When I think about the importance of protecting my family, this is a small price to pay to have peace of mind that they will be covered if anything were to happen to me.

Is your family covered in case something were to happen to you? If not, don’t put this on your to-do list for next week. Click here and take two minutes to protect your family TODAY.

Do you have term life insurance? If not, have you ever considered getting it? Let me know in the comments below!

Note: Every persons’ situation is unique, so you should consider talking with a licensed professional when making serious financial decisions. Also, it is worth noting that getting a quote will take around 2 minutes but the process to get life insurance will be longer than that. Each company will have its own process when it comes to issuing the actual life insurance policy.

Do you have a life insurance policy in place? Are you on your way to becoming self-insured?

Author

Deacon Hayes

Deacon Hayes is a financial expert, speaker, and podcaster. He is the founder of Well Kept Wallet which is a financial education company that provides personal finance resources to people across the world.

Deacon has been featured in many news publications including Yahoo Finance, US News & World Report, Investopedia, CNN Money, and more.

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He has helped thousands of people develop a financial game plan so that they can achieve their financial goals in life, and is the author of You Can Retire Early!: Everything You Need to Achieve Financial Independence When You Want It.

Reader Interactions

2 Comments

Laurie, thanks for this article.

My old neighbor just passed away without any life insurance. He left a wife and a few kids. Now the mom is having to go back to work (she has been a full time mom for 20 years) to make ends meet. It’s such a tragic story that could have been prevented had they spent just a few dollars each month to have a policy.

Life insurance is sometimes talked about as the “self-less” expense. You never plan on dying unexpectedly, but your surviving family members will always benefit from you having life insurance. Even a little bit of life insurance will help.

Thank you so much for sharing this article! We agree with you that life insurance is extremely important and that term life insurance is much more affordable!

If you don’t mind us sharing, we have a similar article about if you are family oriented you should invest in life insurance! We would love for you to check it out and share your opinions on it with us!

Do I need Life Insurance?

You’ve heard that the two certainties in life are death and taxes? Well, life insurance can help you hedge against both (in a way!). Let’s talk about whether buying a life insurance policy is right for you.

What is life insurance and how does life insurance work?

The history of life insurance goes way back. These days when you purchase a life insurance policy, you start paying to a life insurance company. In return, the life insurance company agrees to pay your beneficiary or beneficiaries a lump sum in the event of your death. There is life insurance for adults, children, veterans, seniors and folks with disabilities. There is term life insurance, limited pay life insurance, cash value life insurance, supplemental life insurance and permanent life insurance. In addition to monetary benefits, the purpose of having life insurance coverage is to give you, the life insurance policy holder, peace of mind. Having it means knowing that your life insurance pay-out will soften the financial blow of your death. So do you need it? Is life insurance worth the cost for you? Here are some questions to consider.

Do you have dependents who need your financial support?

This is the most important question to consider. If you don’t have any dependents, you may be able get away with having no life insurance or buying a smaller policy that will cover your funeral expenses and any unpaid debts you leave behind.

If you’re a parent with children — especially if you’re the only income-earner — life insurance is usually the key financial tool to make sure your family stays afloat if anything happens to you. In general, the younger your kids are, the more money you should have in your life insurance policy. Many parents phase out their life insurance once their kids graduate from college and get off the parental payroll. Others keep some life insurance to ensure their spouse will still be able to lead a comfortable life. Still other people keep life insurance policies to help support parents, siblings or friends who rely on them for financial security. Family life insurance policies can offer discounts for covering more than one member of the same immediate family.

Do you have debt?

When you die with unpaid debt, from credit card bills to mortgages and medical expenses, what you owe usually gets deducted from your estate. Buying a life insurance policy, even if you’re single and childless, can be a smart move if you’re carrying a debt burden. Otherwise, co-signers of loans or joint credit card holders may be responsible for paying back your debt. Life insurance can be an important estate planning tool. It can also be a source of last-resort cash. Some policies allow you to take a life insurance policy loan, borrowing the policy’s cash surrender value.

How old are you?

If you’re in your later years you might not need as much (or any!) life insurance, unless you have young children or a much younger spouse who depends on your earnings and may need your life insurance policy to fund his or her retirement. If you’re young and healthy, life insurance will never be cheaper than it is now, and you can usually lock in low rates. So the answer to the question, Do I need life insurance? may be yes simply because you plan to have a family in the future and want to lock in the lowest possible rate now.

Do you have your heart set on a lavish funeral?

Hey, we’re not judging. Just know that your fancy funeral will cost your loved ones—and plan accordingly. At the very least you should get a life insurance policy that covers final costs like burial expenses. If you only need a small amount of coverage (also known as a low “face amount”), your life insurance premiums should be lower than average. If you can’t afford life insurance premiums, life insurance premium financing (a loan to help you make your premium payments) is an option, but like any loan it carries risks.

How healthy are you?

The less healthy you are, the more dangerous your job and the more diseases run in your family, the greater your need for life insurance is. That’s because the odds are higher that you might leave your dependents in the lurch. Unfortunately, the more you need life insurance for these kinds of reasons, the more you’ll have to pay for it. If you can, you may want to try to get a waiver of premium rider added to your policy. This rider will ensure that your life insurance plan will stay in effect even if you become ill or disabled and can’t keep up with your premiums.

When you buy life insurance, you’re betting that you will die and the insurance company is betting that you won’t. They don’t want you to die, because if you die they have to pay up. So they give the lowest premium rates to the healthiest people with the least dangerous jobs and the most pristine family medical histories. Life insurance premium rates are often divided into different categories, with names like “preferred” and “standard” that correspond to risk levels. If you’re not in the lucky «preferred» category, get ready to pay a little extra for peace of mind for you and your dependents. Unfortunately, life insurance premiums are not tax deductible.

Estate taxing

Once you’ve decided the answer to Do I need life insurance? is ‘yes,’ and you’ve chosen a beneficiary, start thinking about how to lower the tax burden on your life insurance payout. If possible, you want to keep your policy from being tied up in probate court, and you want to keep estate taxes from eating into the assets your loved ones inherit.

To keep your life insurance policy out of probate court, don’t name your estate as the beneficiary. If you follow this simple rule, the money from your payout will be available quickly when your loved ones need it the most.

If you’re wealthy enough that your estate will be subject to estate taxes, you need to consider how to protect your life insurance policy. The exception to this is if your spouse is your beneficiary, since property left to spouses is not subject to estate taxes. If anyone other than a spouse is your beneficiary and if you are the listed owner of your life insurance policy when you die, the policy will be subject to estate taxes. One strategy for avoiding this scenario is to transfer ownership of the policy to your beneficiary or another trusted adult. Just bear in mind that in doing this, you give up control of the policy and lose the right to change the beneficiary. If you designate someone as an irrevocable beneficiary you will not be able to remove him or her, so it’s important to choose carefully.


Brush up on your Latin

Say you have two sons and you name them both as your beneficiaries, to split the payout equally when you die. Meanwhile, one of them has two daughters and the other has no kids. Now say the son with the two daughters dies before you. When you die, do you A) want half of the payout to go to one son, with the other half split between your two granddaughters? Or do you B) want your son and two granddaughters to split the payout three ways?

If you answered A, you want your life insurance beneficiaries to inherit per stirpes. If you answered B, you want your beneficiaries to inherit per capita.

The… unconventional side of life insurance

When most people think of life insurance, they think of the typical intra-family set-up, where one person takes out a policy to protect children or a spouse. There’s more to the life insurance market, though.

  • Life settlements: If you feel you no longer need your life insurance policy or you want to exchange it for money now, you can sell the policy back to the insurance company and redeem the policy’s cash surrender value. Or, you can try to get a higher price for your policy on the secondary market in life settlements. With a life settlement, also known as a viatical, investors pay you more than you would get in cash surrender money from the insurance company, but less than what your beneficiary would get if you died. The investor gets to keep your policy and becomes the beneficiary, and you get ready cash. Not everyone is comfortable with this secondary market, since it’s basically made up of people betting on other people’s death, but it’s perfectly legal.
  • Corporate-owned insurance: Another little-known but legal side of the life insurance landscape is corporate-owned insurance, which sometimes goes by the pejorative terms “dead peasant insurance” or “janitors insurance.” With corporate-owned insurance, an employer takes out a life insurance policy on an employee. When the employee dies, instead of the payout going to the worker’s family, it goes to the worker’s boss and into the company coffers. For employers, these plans are tax advantaged and provide a way to hedge against the risk that an employee they’ve invested in won’t be around for the long term.
  • STOLI: No, we’re not talking about cheap vodka, we’re talking about stranger-originated life insurance. With a STOLI, an investor asks someone—usually an elderly person—to sell their life insurance policy. Essentially, it’s a life settlement that isn’t the seller’s idea. With a STOLI, a senior gets an offer of easy money. All they have to do is sign some forms authorizing a third party to access their medical records and take over their life insurance policy. The senior takes out a new life insurance policy or transfers an existing policy to an investor they’ve never met before. The investor agrees to pay the premiums on the senior’s policy, and becomes the beneficiary. Usually the senior will get a one-time payment in exchange for his or her trouble. Then, the investor waits for the senior to die and cashes out when the time comes. While these are legal in some states, they are often used as part of less-than-legal scams. In general, the person named as a beneficiary to a life insurance policy should be someone who has what’s called an “insurable interest” in the policyholder. In other words, it must be someone like a spouse, partner, business partner or relative.

One last thing: If you choose to buy life insurance, don’t forget to tell your policy’s beneficiary. Since you’ve decided the answer is yes to do I need life insurance, you really want to know that the money will go where you want it to. Every year, millions of dollars of life insurance policies go unclaimed because the beneficiaries don’t know to claim the money. If you want your policy to go to your loved ones instead of the insurance company (and we’re assuming you do!) don’t keep the policy a secret. Now you just have to answer the question, How much life insurance do I need?

How Much Life Insurance Do I Need in 2020?

Knowing how much life insurance you need depends on multiple factors, including your age, your family status, your current income, and your health, among other realities. You’ll also need a good hand on your estimated household debt on a monthly or an annual basis.

Pulling all of those factors together and working with a trusted insurance or financial adviser can get you a good estimate of how much life insurance you need, at any point in your life.

No doubt, knowing how much life insurance you need, and then acting on that knowledge, is highly advisable.

Life insurance can protect loved ones in the event of the policyholder’s death. If life insurance was not in that picture, or if it’s not enough coverage, families could be left with a host of devastating bills and a bleak household financial outlook.

That’s a situation that can be reversed with life insurance, especially if you have a good grip on how much life insurance you need.

What Is Life Insurance?

Life insurance stands among long-term investing, home ownership and credit health as the staples of lifelong personal financial priorities. Most Americans get that fact, as approximately 60% of U.S. adults were covered by life insurance in 2020, according to industry statistics

In a word, life insurance represents a contract between an individual (i.e., the policyholder) and an insurance company. In that contract, the policyholder makes regular payments to the insurance company in exchange for a lump-sum payment by the life insurer to the policyholder’s beneficiaries upon the death of that policyholder.

Life insurance payments are made to beneficiaries immediately after the insured’s death, and are paid out on a lump-sum basis, with no income taxes taken out of the payment. The amount of life insurance needed to adequately compensate the insured’s beneficiaries can vary, depending on the policyholder’s financial situation and the financial needs of the beneficiaries.

Term Life Insurance Versus Universal Life Insurance

Life insurance consumers should make financial decisions based on the two types of life insurance available — term life insurance versus permanent (or universal) life insurance. Here’s a breakdown of each one:

Term Life Insurance

This life insurance model offers a life insurance customer financial protection for a fixed period of time, like 10 or 20 years. During that time period, the policyholder makes regular payments (monthly, semi-annually and annually are the most common consumer payment time frames). If, in that time, the policyholder dies, the life insurance company pays out to the beneficiaries based on the policy amount (say, $500,000 or $1 million.)

Term insurance customers often use the policies to protect against income loss at critical times in a policyholder’s life, like after buying a new home, or sending the kids off to college. In those scenarios, term insurance payments can cover those costs in the event the policyholder is no longer around.

If the policyholder is still alive after the term policy period is over, the life insurance company usually offers continued coverage, although likely at a higher insurance rate, given the older age of the policyholder — which the insured is under no obligation to accept.

In general, though, term insurance, since it’s built on a fixed time platform, is usually less expensive than universal life insurance.

Universal Life Insurance

This type of life insurance provides the policyholder with either long-term or lifelong insurance coverage, which also means that universal life insurance will cost more than term insurance, as the coverage period can easily go for 20 or 30 years, or longer.

Where term insurance conditions are largely fixed, universal life policies are fairly flexible, allowing the policyholder to tweak and adjust his or her insurance coverage in the course of their lifetimes, dependent on how their personal financial scenario changes over the years.

Another form of longer-term insurance is whole life insurance, which largely mirrors universal life insurance policies. With both types of insurance, policy terms are fixed, as the policy covers the insured for a lifetime, with no exceptions. Both universal and whole life insurance payouts are exempt from income taxes.

How Much Life Insurance Do You Really Need?

To get your life insurance coverage campaign up and running, take the following action steps:

Understand how life insurance companies figure out costs. Obviously, life insurance companies have financial skin in the life insurance coverage game. On a broader scale, they set the table for any consumer conversation on costs using a variety of actuarial tools, such as rate classes, risk-related issues, and demographics. Insurers break those categories down when actually calculating life insurance costs. Specifically, life insurance rates are set by a variety of personal consumer factors, including the policyholder’s health (most insurers insist on a medical exam), the policyholder’s family medical history, lifestyle issues (whether or not you’re a smoker and if you get enough exercise, for example.) If you are a smoker, or you’re living a sedentary lifestyle, expect to pay more for life insurance.

Once you understand how life insurance companies operate, cost-wise, and know what factors they use in setting premium rates, you can estimate how much life insurance you really need.

Start by factoring in your beneficiary’s needs, coupled with your annual estimated income (more on that in a moment.)

You’ll want your total life insurance payout to cover your income and cover those larger debts. The idea is to add up your estimated annual income and your total household debts (think mortgage, college, auto, and any outliers like personal loans or home equity loans.)

Add them all up on an annual basis and the resulting number will let you know, in approximate terms, where you stand and what you need in life insurance coverage to financially protect your family.

For instance, let’s say you have the following annual income and debt levels:

Annual income/salary (net) = $75,000

Annual household debt

Home mortgage = $15,000

Auto Loan = $4,000

College loans = $3,000

Total household debts = $25,000

Using those calculations, you’ll need your life insurance policy to payout about $100,000 annually to keep up with household income and expenses.

Figure out your life insurance coverage number. One formula that has gained traction in financial advisory circles is taking your annual income/salary, add in the amount of existing household debt, and multiplying it by a specific number. The number you can use may range from 10 or 20 times your total salary, income and debt, and it depends on your personal financial situation.


This formula is useful in getting a «ballpark figure» on life insurance coverage.

For example, let’s once again say you earn $75,000 annually and you want to wind up in the $1 million life insurance coverage range. Let’s also say that you have about $25,000 in annual household debt, as noted above. Thus, you’ll need to cover about $100,000 yearly in life insurance protection, over a period of years.

Using this formula, you multiply that 100,000 by 10 and wind up with a figure of 1,000,000 — that means you need about $1 million to cover your expenses to cover your family’s financial needs over the 10-year period after your death.

If you’re in the same annual income and debt range (again, $75,000, plus $25,000 in annual debt), and you multiply by 15, (i.e., 100,000 x 15), you’ll wind up at $1.5 million. That’s the amount of money you’ll need for your family to be in good financial standing for approximately 15 years following your death.

Use this formula as a «rule of thumb» exercise, and feel free to add or subtract your calculation numbers as you see fit. By and large, though, you can get a good roundhouse life insurance coverage using this formula.

A caveat here — this isn’t an exact science, but by using the information above, you can gain a rough estimate of your needed life insurance coverage needs.

Consult With an Expert

As always, it’s strongly advised that you consult with a trusted financial adviser, insurance professional, or estate planning professional to come up with a unique life insurance plan that works for you and your family.

When you do, bring your life insurance coverage estimates using the formulas listed above — that will get you started in the right direction when you’re figuring out how much life insurance you really need.

A Special Invitation: Do you want to learn more about planning for and living in retirement from the nation’s top experts, including Ed Slott and Robert Powell, the editor of TheStreet’s Retirement Daily? Want to learn how to create tax-efficient income in retirement and how to manage and mitigate all the risks you’ll face in retirement? Then sign up to attend TheStreet’s Retirement Strategies Symposium on April 6 in New York City. For a limited time, you can attend this extraordinary symposium for $149 — a cost savings of $50 off the general admission price of $199. You can see the full day’s agenda, learn about the guest speakers and sign up here for this special event.

Do I need Life Insurance?

You’ve heard that the two certainties in life are death and taxes? Well, life insurance can help you hedge against both (in a way!). Let’s talk about whether buying a life insurance policy is right for you.

What is life insurance and how does life insurance work?

The history of life insurance goes way back. These days when you purchase a life insurance policy, you start paying to a life insurance company. In return, the life insurance company agrees to pay your beneficiary or beneficiaries a lump sum in the event of your death. There is life insurance for adults, children, veterans, seniors and folks with disabilities. There is term life insurance, limited pay life insurance, cash value life insurance, supplemental life insurance and permanent life insurance. In addition to monetary benefits, the purpose of having life insurance coverage is to give you, the life insurance policy holder, peace of mind. Having it means knowing that your life insurance pay-out will soften the financial blow of your death. So do you need it? Is life insurance worth the cost for you? Here are some questions to consider.

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Do you have dependents who need your financial support?

This is the most important question to consider. If you don’t have any dependents, you may be able get away with having no life insurance or buying a smaller policy that will cover your funeral expenses and any unpaid debts you leave behind.

If you’re a parent with children — especially if you’re the only income-earner — life insurance is usually the key financial tool to make sure your family stays afloat if anything happens to you. In general, the younger your kids are, the more money you should have in your life insurance policy. Many parents phase out their life insurance once their kids graduate from college and get off the parental payroll. Others keep some life insurance to ensure their spouse will still be able to lead a comfortable life. Still other people keep life insurance policies to help support parents, siblings or friends who rely on them for financial security. Family life insurance policies can offer discounts for covering more than one member of the same immediate family.

Do you have debt?

When you die with unpaid debt, from credit card bills to mortgages and medical expenses, what you owe usually gets deducted from your estate. Buying a life insurance policy, even if you’re single and childless, can be a smart move if you’re carrying a debt burden. Otherwise, co-signers of loans or joint credit card holders may be responsible for paying back your debt. Life insurance can be an important estate planning tool. It can also be a source of last-resort cash. Some policies allow you to take a life insurance policy loan, borrowing the policy’s cash surrender value.

How old are you?

If you’re in your later years you might not need as much (or any!) life insurance, unless you have young children or a much younger spouse who depends on your earnings and may need your life insurance policy to fund his or her retirement. If you’re young and healthy, life insurance will never be cheaper than it is now, and you can usually lock in low rates. So the answer to the question, Do I need life insurance? may be yes simply because you plan to have a family in the future and want to lock in the lowest possible rate now.

Do you have your heart set on a lavish funeral?

Hey, we’re not judging. Just know that your fancy funeral will cost your loved ones—and plan accordingly. At the very least you should get a life insurance policy that covers final costs like burial expenses. If you only need a small amount of coverage (also known as a low “face amount”), your life insurance premiums should be lower than average. If you can’t afford life insurance premiums, life insurance premium financing (a loan to help you make your premium payments) is an option, but like any loan it carries risks.

How healthy are you?

The less healthy you are, the more dangerous your job and the more diseases run in your family, the greater your need for life insurance is. That’s because the odds are higher that you might leave your dependents in the lurch. Unfortunately, the more you need life insurance for these kinds of reasons, the more you’ll have to pay for it. If you can, you may want to try to get a waiver of premium rider added to your policy. This rider will ensure that your life insurance plan will stay in effect even if you become ill or disabled and can’t keep up with your premiums.

When you buy life insurance, you’re betting that you will die and the insurance company is betting that you won’t. They don’t want you to die, because if you die they have to pay up. So they give the lowest premium rates to the healthiest people with the least dangerous jobs and the most pristine family medical histories. Life insurance premium rates are often divided into different categories, with names like “preferred” and “standard” that correspond to risk levels. If you’re not in the lucky «preferred» category, get ready to pay a little extra for peace of mind for you and your dependents. Unfortunately, life insurance premiums are not tax deductible.

Estate taxing

Once you’ve decided the answer to Do I need life insurance? is ‘yes,’ and you’ve chosen a beneficiary, start thinking about how to lower the tax burden on your life insurance payout. If possible, you want to keep your policy from being tied up in probate court, and you want to keep estate taxes from eating into the assets your loved ones inherit.

To keep your life insurance policy out of probate court, don’t name your estate as the beneficiary. If you follow this simple rule, the money from your payout will be available quickly when your loved ones need it the most.

If you’re wealthy enough that your estate will be subject to estate taxes, you need to consider how to protect your life insurance policy. The exception to this is if your spouse is your beneficiary, since property left to spouses is not subject to estate taxes. If anyone other than a spouse is your beneficiary and if you are the listed owner of your life insurance policy when you die, the policy will be subject to estate taxes. One strategy for avoiding this scenario is to transfer ownership of the policy to your beneficiary or another trusted adult. Just bear in mind that in doing this, you give up control of the policy and lose the right to change the beneficiary. If you designate someone as an irrevocable beneficiary you will not be able to remove him or her, so it’s important to choose carefully.

Brush up on your Latin

Say you have two sons and you name them both as your beneficiaries, to split the payout equally when you die. Meanwhile, one of them has two daughters and the other has no kids. Now say the son with the two daughters dies before you. When you die, do you A) want half of the payout to go to one son, with the other half split between your two granddaughters? Or do you B) want your son and two granddaughters to split the payout three ways?

If you answered A, you want your life insurance beneficiaries to inherit per stirpes. If you answered B, you want your beneficiaries to inherit per capita.

The… unconventional side of life insurance

When most people think of life insurance, they think of the typical intra-family set-up, where one person takes out a policy to protect children or a spouse. There’s more to the life insurance market, though.

  • Life settlements: If you feel you no longer need your life insurance policy or you want to exchange it for money now, you can sell the policy back to the insurance company and redeem the policy’s cash surrender value. Or, you can try to get a higher price for your policy on the secondary market in life settlements. With a life settlement, also known as a viatical, investors pay you more than you would get in cash surrender money from the insurance company, but less than what your beneficiary would get if you died. The investor gets to keep your policy and becomes the beneficiary, and you get ready cash. Not everyone is comfortable with this secondary market, since it’s basically made up of people betting on other people’s death, but it’s perfectly legal.
  • Corporate-owned insurance: Another little-known but legal side of the life insurance landscape is corporate-owned insurance, which sometimes goes by the pejorative terms “dead peasant insurance” or “janitors insurance.” With corporate-owned insurance, an employer takes out a life insurance policy on an employee. When the employee dies, instead of the payout going to the worker’s family, it goes to the worker’s boss and into the company coffers. For employers, these plans are tax advantaged and provide a way to hedge against the risk that an employee they’ve invested in won’t be around for the long term.
  • STOLI: No, we’re not talking about cheap vodka, we’re talking about stranger-originated life insurance. With a STOLI, an investor asks someone—usually an elderly person—to sell their life insurance policy. Essentially, it’s a life settlement that isn’t the seller’s idea. With a STOLI, a senior gets an offer of easy money. All they have to do is sign some forms authorizing a third party to access their medical records and take over their life insurance policy. The senior takes out a new life insurance policy or transfers an existing policy to an investor they’ve never met before. The investor agrees to pay the premiums on the senior’s policy, and becomes the beneficiary. Usually the senior will get a one-time payment in exchange for his or her trouble. Then, the investor waits for the senior to die and cashes out when the time comes. While these are legal in some states, they are often used as part of less-than-legal scams. In general, the person named as a beneficiary to a life insurance policy should be someone who has what’s called an “insurable interest” in the policyholder. In other words, it must be someone like a spouse, partner, business partner or relative.

One last thing: If you choose to buy life insurance, don’t forget to tell your policy’s beneficiary. Since you’ve decided the answer is yes to do I need life insurance, you really want to know that the money will go where you want it to. Every year, millions of dollars of life insurance policies go unclaimed because the beneficiaries don’t know to claim the money. If you want your policy to go to your loved ones instead of the insurance company (and we’re assuming you do!) don’t keep the policy a secret. Now you just have to answer the question, How much life insurance do I need?

Health care in Canada

Canada’s universal health-care system

If you are a Canadian citizen or permanent resident, you may apply for public health insurance. With it, you don’t have to pay for most health-care services.

The universal health-care system is paid for through taxes. When you use public health-care services, you must show your health insurance card to the hospital or medical clinic.

Each province and territory has their own health insurance plan. Make sure you know what your plan covers.

All provinces and territories will provide free emergency medical services, even if you don’t have a government health card. There may be restrictions depending on your immigration status.


If you have an emergency, go to the nearest hospital. A walk-in clinic might charge fees if you don’t live in that province or territory.

Waiting period to get public health insurance

In some provinces you must wait, sometimes up to three months, before you can get government health insurance. Contact the ministry of health in your province or territory to know how long you’ll need to wait. Make sure you have private health insurance to cover your health-care needs during this waiting period.

Getting a health card

You need a health insurance card from the province or territory where you live to get health care in Canada. You must show this card each time you get medical services.

Provincial and territorial ministries of health:

  • Alberta
  • British Columbia
  • Manitoba
  • New Brunswick
  • Newfoundland and Labrador
  • Northwest Territories
  • Nova Scotia
  • Nunavut
  • Ontario
  • Prince Edward Island
  • Quebec (in French only)
  • Saskatchewan
  • Yukon

Extra health insurance

Government health insurance plans give you access to basic medical services. You may also need private insurance to pay for things that government plans don’t fully cover.

The most common types of plans are extended health plans. These cover costs for:

  • prescription medications
  • dental care
  • physiotherapy
  • ambulance services
  • prescription eyeglasses

If you work, you may get extra coverage from the company or organization you work for.

Health coverage for protected persons or refugee claimants

In some cases, the Interim Federal Health Program (IFHP) provides temporary health insurance to:

  • refugees
  • protected persons
  • refugee claimants

The temporary care covers you and your dependents until you are eligible for health plan coverage through your province, territory or private plan.

Do I Really Need Life Insurance?

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Is Life Insurance a Good Idea?

Hannah Boykin’s parents didn’t think so.

And tragically, both of them passed away within 14 months of each other, leaving 6 kids behind (mostly teenagers) with no financial support.

The children were devastated, not just because they lost both of their parents, but also because they had to be split up. No one in the family could afford to take all of them at once.

Term Life Insurance is extremely affordable. I recommend 10-12x your income over 20-30 years. Get a real-time quote here.

We heard about Hannah’s tragic story when she applied for our scholarship. Hannah is extraordinary in that throughout this experience, she still managed to graduate at the top of her class in high school and start a nursing program.

…but after being split up from her brothers and sisters, and suffering the effects of zero financial support in college, I can’t help but wonder how things would have been different for her family if life insurance had been in the picture.

I tell that story not to scare you into buying life insurance but to show that death can not only be unexpected, but it can also have a lasting impact beyond the loss of a loved one.

Fortunately, there’s a simple and affordable way to prevent Hanna’s story from EVER becoming your family’s story… life insurance.

Table of Contents

Do you really need life insurance?


The short answer is, most likely yes.

If you rent or own a home, and can’t answer the question, “Where would my family be living 1 year from today if I suddenly died,” you need life insurance. (HINT: The answer should be in the exact same place they are living now.)

In fact, if anyone in your family at your workplace relies on the income (or services) you provide, and would be impacted financially by your death, you need life insurance.

Related: See how low rates are for Term Life Insurance right now

According to LIMRA, the top four reasons people buy life insurance are as follows:

  1. Cover burial and other final expenses
  2. Transfer wealth or leave an inheritance
  3. Help replace lost income
  4. Pay off a mortgage

Between all of these, most people are covered. Let’s take a look at each one in turn:

#1 – Cover burial and other final expenses

Whether or not you have people depending on you financially, you can’t escape these expenses.

…funerals and burial aren’t cheap either, running about $11,000 on average.

A guaranteed universal life plan for that amount is fairly cheap, costing less than $20 in many cases, so don’t leave it up to your family or GoFundMe to foot the bill.

You can request a guaranteed universal life quote by clicking here and selecting the “Lifetime” option under the “term period” dropdown.

#2 – Transfer wealth or leave an inheritance

If you’re independently wealthy, you might think you don’t need life insurance. But if your estate is worth more than $5.49 million (or $10.98 million for married couples) in 2020, you’ll pay a staggering 40% federal estate tax on the amount above that threshold.

Having enough life insurance to cover those taxes means that Uncle Sam gets less of your money and your heirs get more.

Just make sure your life insurance benefit is paid out correctly. If not, it could be included in your estate and be considered taxable. Read this article to learn more.

If you’re not independently wealthy but still want to leave something for your kids, you can still do it.

For example, let’s say a 65-year-old man earning $50,000 a year on his pension wants to leave $150,000 for his three children to divide up.

Assuming he lives until age 80 and gets a 5% return after tax, he’d have to set aside $6,951 every year to make that happen.

On the flip side, if that same man is in good health, he could get a guaranteed universal life policy that would pay out $150,000 for as little as $3,065 per year.

…that’s less than half the cost.

Plus, he doesn’t have to save until age 80 to make it happen. If he were to pass away the next week after purchasing life insurance, his heirs would still get the full $150,000.

The best way to cover an estate planning need is usually with guaranteed universal life. It costs on average half what whole life insurance costs and offers guaranteed coverage for life. You can request a quote by clicking here and selecting the “Lifetime” option under the “Term period” dropdown.

#3 – Help replace lost income

At the outset, I asked, “If you were to die tomorrow, where would your family live a year from now?

How about 3 years? Will your spouse still be able to make rent or mortgage payments? Will your kids still be able to do sports or other extracurricular activities?

If you’re the breadwinner in your relationship, losing your income could limit your family’s future, especially if you still have 2 or 3 decades left in your working career.

Term life insurance is the best way to cover lost income. It’s cheap and flexible. For example, a 35-year-old male in good health could get a 30-year $500,000 term policy for as little as $38 per month.

…you’re not stuck with 30 years either. You can typically choose between a 10-, 20-, 30- or even 40-year term.

#4 – Pay off a mortgage

Debt can weigh you down in any financial situation, but more so when you’ve just lost a loved one.

That’s why a lot of people get life insurance help their spouse pay off their biggest debt — their mortgage — in case they die prematurely.

…but what about other debts?

Basically, you might want to consider getting enough coverage to pay off any debt that both you and your spouse hold. Again, it’s not about getting rich. It’s about preserving your family’s way of life.

3 tips to help you get started

As you can see, there aren’t many situations where you don’t need life insurance.

So, to help you get started on the right foot, here are three tips:

#1 – How to buy life insurance

Work with an independent agent to make sure you’re getting the best deal on your life insurance.

…you’ll know if an agent is independent if they’re offering you quotes from several different insurance companies.

If they sell insurance from just one company, you’re likely not going to get the best deal out there.

You can usually get free quotes online and then go from there.

#2 – Use these ways to save

There are several ways to save on life insurance, but here are the top three:

  1. Pennies from Heaven strategy – Instead of choosing a policy with a lump sum payout, opt for one with an income option. This can save you 10% to 30% while still offering a steady income. This is a proprietary savings strategy we use at Huntley Wealth, so if you’re interest in this strategy, request a quote here and tell your agent to show you the Pennies from Heaven quotes.
  2. Lose a few pounds – There’s a 25% price difference between health classes, and in many cases, they’re separated by only a few pounds or a few cholesterol or blood pressure points. Take a week to exercise and eat well to improve your health prior to applying for coverage, and you could save 25% to 50%.
  3. Do the medical exam – No-exam life insurance sounds tempting — who else hates needles? But these policies cost 10% to 40% more because the insurance company can’t assess your health risk as well. So, unless you have major health problems or have an urgent need for the coverage to take effect, take the exam.

Read this article for more ways to save on your life insurance policy.

#3 – Watch out for the hard sell

Life insurance agents make money when you buy a policy from them.

…so naturally, there’s a conflict of interest.

If you ever feel uncomfortable about the way an insurance agent approaches the sell — especially if he or she is spending a lot of time on expensive whole life insurance — don’t walk …run to your nearest exit.

It’s Hero Time

We all believe we’re invincible, but the fact of the matter is that unexpected deaths happen all the time. What’s more, life insurance gets more expensive as you get older.

So it’s time to make a choice…

If you want to be able to protect and provide for your family (even if you’re not here), you can click here to start with a free quote right now — It literally takes less than 1 minute!

I know… that’s some bigtime superhero, life-after-death talk right there, but I’m being serious.

The alternative is to leave your family’s well-being in the hands of chance, who could face serious obstacles without you.

To achieve instant “hero” status, make sure your loved ones are protected, and punch death in the face, click here now.

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