What's the Cheapest Life Insurance?

I hear this question a lot, and it is a easy question to answer.  It's the life insurance that you buy when you are young, healthy and don't need it.  So what do you do if you've let the years slip by and find yourself in need of a policy to protect your family?  I'll give you the short and simple answer.

Straight annual renewable term, which renews automatically each year and is based on your age.  But if you are getting up there in age this quickly becomes too expensive.  This type of term is the cheapest if you are talking about right now.

Traditional whole life which builds cash value and eventually begins paying it's own premiums when purchased for a young person will be the cheapest when they are older because the cost never goes up and it will have value to use later.

But my favorite cheap life insurance is the FREE kind!  It's called Return of Premium term.  The name says it all, it is a term policy that lasts for 20 or 30 years and if you die during that time your heirs get the death benefit but if you live (which most are hoping to do) you get all your premium back (tax free).

Why doesn't everyone buy this option, you ask?  Well some financial experts (the next statement makes this sound funny) suggest it is smarter to buy the slightly less expensive term policy and invest the difference between the two.  Hhhhhmmmm?!?!?!?  Sounds good except you are not guaranteed to even make back what you invest let alone enough to pay for the life insurance and still come out ahead.  Why not buy the Return of Premium policy and in 20 years have a lump sum to invest (guaranteed) and have protected your family all along the way?

So, what's the cheapest life insurance? Free!

J

How big of a tax bill are you leaving for the kids & grandchildren?

Do you think about this?  I do ... what will Uncle Sam take from my children's inheritance?  How much of my legacy will be lost to taxes?  Do you really want your heirs to lose the money that you have set aside for them?  No, of course not but have you spent a couple of hours to plan a strategy for helping them keep more of what you leave behind?

Here are two quick ideas to help you plan for giving ALL of your legacy to your heirs.  These are just a starting point, you need to speak to your insurance professional to personalize them and see if they will work for you.

First, if you have a lump sum of money that you want to leave to your grandchildren or you kids, lets say you have $10,000 in the bank that you got from the sale of your Great Aunt's home when she passed away.  You figure that you will hold on to it in case you need it but once you are gone you want the Grand kids (let's say you have two) to get enough to buy a car or put down on a small home.  $5,000 is not a bad amount ... and you are not risking it in the stock market so you leave it in the bank and put in your will that they get it when you are gone.  But when you pass away they will have to what for the probate process to be completed.  Then if there are no other liens on the estate they will at least be charged income tax (about 25%) and Indiana inheritance tax (5%).  This means they will both get about $3,500 after those taxes are satisfied. 

Okay let's change one part of this example, let's say that you buy a single premium life insurance policy with the $10,000, this will buy your heirs about $19,444 (assuming you don't use tobacco are age 65, female and in pretty good health) in death benefit when you pass away.  Which means that each grandchild will get $9,722 with no income tax or Indiana inheritance tax and they will get their money right away regardless of thee probate process or any additional liens on the estate.  So your two grand kids will get over 2 & 1/2 times the money.

Now, the second example is if you have 100 acres that you are leaving to your 3 children.  Let's say the fair market value of that 100 acres is $7,500 an acre ... you see where I'm going with this right?  You add the value of the land the value of the home the other assets and soon your children have a pretty big tax bill. 

If you spend a few hours with your insurance professional you will know what that tax figure will look like and you can take out a life insurance policy that will give your children the funds they need to pay the tax bill without having to sell off pieces of the family farm at a time when they are morning the loss of a parent.

Every one's situation is different but by planning ahead you can leave even more  for your heirs and really reduce the tax burden that they will face in the wake of your passing.  One note though ... the earlier in life that you start the process the less it will cost you, both of these options require you to be insurable and under the age of 80.

Here are some online calculators to help you figure out what you will need to pass on all you have worked so hard to get.

http://www.infarmbureau.com/website/general/resourcesTools.aspx

J

What if ?

In the insurance business you tend to spend a lot of time asking "what if".  None of the fun questions that you asked yourself when you were a teenager.  When I was a teen I asked myself  "what if'", I had a million dollars ... or ... what if I asked her on a date ... what if I became a famous rock star?  No, the questions I ask of myself now are more like, what if you have an accident ... what if you had a fire ... what if you died tonight? 

That's my job, asking myself and my clients, what if?  I am forced to think about the future in a way that most people don't want to think about it.  This makes me an unpopular guy in the moment I ask a client "what if", and they are not ready to consider "what if".  But these big looming questions exist whether I ask them or not and the answers will plague my clients with a great deal of sorrow.

One area that is most uncomfortable is the "what if" that surrounds our children.  What if they crash the car?  What if they hurt someone?  What if they get hurt?  What if they die?  No one ever wants to look at these possibilities, but I speak with parents everyday that have had these questions answered for them in the aftermath of a personal disaster.  Many of these parents had not asked the question before hand and they were caught off guard by an accident.  I want to take just a moment to discuss the most difficult of these questions and illuminate the answer to a question you never want to ask.

Lets imagine that you have a teenager who is in college, maybe Ball State or Indiana State University.  You want them to learn the ethics that makes the Midwest famous so you have them work and take out loans to pay for their college.  Lets imagine that it is working, you have a great kid who is in their 3rd year and has an A- or B+ ... they work they go to school and study, they don't drink and drive and they are very responsible.
But it is Wednesday night and your child is on their way to work, they just aced a test and are feeling good about the world, when BAMM!  They are Tee boned by a drunk driver that ran the light.  Your child is pronounced dead on arrival but not before being life lined to Indianapolis.  On the day after the worst day of your life you will realize that your child will never get to use the education that you will now have to pay for, not to mention the thousands of dollars that will be owed to the medical units that worked on them trying to save their life.

How will you pay for those things?  Will you make payments?  A monthly reminder of that day for 3 years, 5 years? 10 years?  This is not a pleasant thought but it is a thought I want to have now rather than later.  Imagine the worse case scenario now and you'll avoid the pain of discovery if you every have to exercise the contingency plans made while asking "what if?".

This is a simple contingency plan, once your son or daughter starts a college program, figure the final debt load they will have upon graduation if they are attending a state university and borrowing half of what is needed then perhaps $30,000 in term life insurance to cover their note.  Just a few dollars a month while they are in school will save you from ever having to make a payment on a loan for your child's unused education.
This is one "what if" that no one should ever have to experience, if you do ... make sure it is not made worse than the horror it already is and make sure their debt is covered.

J

PS: What college costs in Indiana http://www.collegecosts.com/HotTopics/IndianaCollegeCosts/tabid/102/Default.aspx