Jonathan Clements of the Wall Street Journal writes a good article that everyone should take a look at and thing about how it applies specifically to their own lives. His advice has solid grounding, but the execution of the advice could be a potential pitfall for some people.
The Popular Advice
Okay, this one may not be popular advice, but there is no shortage of people trying to shuck policies at young people. As Mr. Clements notes, “Insurance agents often push folks in their 20s to buy cash-value life insurance, arguing that it’s far cheaper to purchase these policies when you are young.”
Mr. Clements Advice
- DON’T DO IT!!!
- Okay maybe do it under very good circumstances, with the right policy, with the right company
My Short Input
I tend to disagree with Mr. Clements a little bit, but the root cause of this advice is the core: don’t listen to SALES people!
Insurance agents are sales people?
Really? Aren’t they looking out for me?
Yes really. No they are not.
What is life insurance for?
NUMBER ONE REASON: to take care of your spouse. You want to give your spouse the ability to continue the lifestyle he or she had before you passed. You do NOT want your spouse to take on a second job or rush after a severe emotional loss to find a job if he or she wasn’t working before.
NUMBER TWO REASON: to take care of your kids. You want to make sure your kids college is paid for and that your spouse doesn’t have to get a second job to raise your kids (wouldn’t that be really counter productive?). Your spouse will need help and sometimes money can buy the help your spouse will need (cook, maid service, gardener, mechanics – things you might have taken care of yourself).
NUMBER THREE REASON: dying is expensive. Ironic isn’t it? But the costs involved with passing can run nearly as much as the costs associated with marriage. Possibly even more so if a hospital or hospice stay was required. You don’t want your family (spouse or not) to have to pay for a funeral, hospital, hospice, whatever after you die. Their emotional grief will be grief enough. In your 20s you don’t (well rarely do people) think about your funeral plans. Your family will need to sort everything out and that takes some money.
NUMBER FOUR REASON: it’s nice to leave some money to those you love just because.
So you’re saying I need life insurance?
No. But I’m saying you should have SOMETHING as a legacy. But make sure it’s something you can afford.
Where do you get insurance from then?
First of all check whether your parents have left you any policies from childhood. Sometimes aunts, uncles, grandparents, etc. give policies (Gerber’s is a popular one – yes the baby food maker) to infants. If you don’t have one then look to your workplace for options.
Chances are when you start work you will be given the option to get a Group Universal Life (GUL) Insurance Policy. You should take this. It’s usually cheap enough to afford and you can start off with a very small policy if you want. If you wait too long (usually 3 or 6 months) you will, like all other policies, need to get a physical and doctor before your policy which could drive costs for some people skyward.
Additionally, if you cannot afford GUL you may look into Accidental Death and Dismemberment. You receive this money on an accidental death which for a young person should cover most of the bases, but keep in mind natural causes is still a risk.
I take a less stringent approach than Mr. Clements here. My advice is do it if you have family to take care off. Do to take care of your passing expenses if you can afford it. Do it if you want to. Don’t do it whenever it’s not worth it. Chances are if it’s being SOLD to you… it’s not worth it.