So What Kind of Life Insurance Do I Need?

November 04, 2010

Lately I’ve been approached a lot from workshop participants and they have asked a common question, “Do I have the right kind of life insurance?”  Now this isn’t an odd question by any means but I was wondering why all of a sudden this has become a hot button.  Was there a sale on life insurance I wasn’t privy to?  Was there a mass life insurance agent licensing I was unaware of?  Whatever the case, it was up to me to quickly let my workshop participants know what to look for in making an informed life insurance decision.

At its simplest, the type of life insurance to buy is either whole (permanent) – which is in effect your entire life assuming you pay your premium, or term insurance which is in effect for a limited time period.  Then it becomes a matter of asking yourself what are you insuring against.  For example, when my daughter was 2 I wanted to make sure that if I were to pass away before she turned 22, she would have enough to pay for her education. My solution – a 20 year term policy because I was only insuring for that time frame.

What if I want to make sure my wife has some income replacement in case I die prematurely?  Since there is no “term” as to when it’s my time to go, this might be the right scenario for whole life insurance.

Obviously the decision of which type of insurance isn’t quite this simple, but at its core, answering the questions “what am I insuring?” and “how long do I need the insurance for?” will make the decision a bit easier.