Let me begin this article with a disclaimer...

I was in the financial services sector for nearly five years before transitioning out of the business last year. So the information presented here is based on experience, case studies, and is completely unbiased... just like the advice I gave clients for years...

Okay, so why write an article now about...

Life Insurance

For starters, financial advisers and life insurance agents have a difficult time getting the word out, as it were. Meaning, they often cannot write about topics they know so much about, because compliance departments (think overpaid lawyers) restrict them from publishing a lot of material.

Why?

Because the number one job of compliance departments is to keep the insurance company (or investment house) from getting sued.

Their focus is on THEIR needs, not yours... and certainly not those of their agents or reps.

So now that I'm free from corporate shackles I can share my thoughts...

And probably the most important reason is that most people are grossly under-insured. Meaning, there are just too many families that are NOT covered by enough life insurance.

And that's just tragic.

If you ask me why that's the case, I can point out a few reasons...

1. people do not want to think about their own mortality
2. people often have the belief that "it won't happen to me"
3. life insurance agents/financial advisers selling the wrong type of policy to people in order to get more commissions.
   

There's not much you can do about the first or second issue. So I'm going to deal with the third...

Life Insurance Policies

Believe it or not, life insurance policies can best be explained if you factor in:

1. your life situation
2. why you need it
3. what the purpose of the insurance is

Forget about all the other factors. These are the big three. Here are some concrete examples to help you think this through...

1. married couples with young kids
2. families with mortgages
3. young couples years away from retirement
   
4. older couples looking to pass something on to their kids and grandkids

Those are just a few examples. So what type of life insurance policy works in those situations?

If you don't mind, let me share a bit of my own story as a way of breaking down some life insurance types.

In upcoming articles I'll dig deeper into these issues...

My wife and I have 2 young children (6 years old and 15 months). Figuring that we'll need coverage at least until they are out of college (assuming they graduate in four years!) that projects out to roughly 20 years of needed coverage.

Being self-employed I don't have group coverage available to me, but my wife does through her employer.

What is Group Life Insurance?

Basically, it's life insurance you can get from your employer. Typically the coverage is based on annual salary, and some companies offer 1x salary to all employees. Some companies allow you to purchase more, up to a cap of 4 or 5 times your salary.

The pros: Dollar for dollar, group coverage is the biggest bargain in the industry. Maximum coverage for minimum premium dollars.

It's not discussed much because agents and personal financial advisers don't make a penny from you purchasing this coverage through your employer.

The cons: Lose your job and you lose coverage. Also, since it is sponsored by your employer, they could take away this benefit package if they so choose.

So my wife has some coverage, but what about me? Well, we both have term life insurance policies providing 20 year coverage.

Term Life Insurance

Term policies are just that - they provide an insurance benefit if something happens while your covered. Meaning, they expire (technically they don't but the premiums jump up so dramaticallly that you'd most likely cancel the policy).

The pros: term policies provide maximum benefit for very affordable premium dollars.

The cons: they expire.

This means that you'll lose coverage if you don't purchase another policy in the future to replace the one you'll lose. Also, since you'll be older when it expires, if you're not in good health you'll pay much more for coverage (if you can get some) in the future, since premiums are based on gender, age and health status.

Some term policies have conversion clauses, meaning you can convert it to another type down the road, like whole life or universal life (we'll talk about those later on).

So why did we choose term policies? Well, to be honest whole life policies are expensive. For the coverage we needed, we just couldn't afford the premiums and still do stuff (like take vacations, save money for the kids college tuition, etc.)

It's sort of a band-aid approach to life insurance, but our main concern right now is maintaining coverage while we have young kids, so that if anything happened to one (or both) of us there would be enough money to maintain the lifestyle we have now.

Does that make sense?

Now, I have a favor to ask you. First, kindly leave a comment here on the site if you found this article valuable. I'm planning at least 4 or 5 more on this topic alone, since we couldn't address everything in one hub.

Second, you may know that I run a web marketing company. Well, I'm not sure if there's enough interest, but I was thinking of starting an insurance quote service and information website.

Yeah, I know, there are a TON of them out there...

My idea is to check out the responses to these articles to see if there's a demand and need for that type of service.

So if you wouldn't mind doing me a favor by just letting me know if you think that website would be useful, helpful, and something you would possibly check out that would be great.

And stay tuned for more hubs on this topic in the near future...