Why you should right-size your life insurance policy
- By Greg Klingler
- Nov 07, 2018
Federal employees are an important part of the fabric that holds this nation together. While your occupation and benefits may differ from the average American, you have the same need to protect your loved ones from the possibility of your premature death. Understanding how to protect your family in the most effective and efficient way is extremely important. When it comes to insurance, it is generally a safe bet that the most expensive and easiest to purchase policies aren’t the best fit for your coverage needs. Much like Goldilocks, finding the perfect amount of coverage requires shrewd evaluation of all your options to right-size your policy.
Where to Start – Reviewing Your Insurance Options
What polices are best for you? The answer depends on many factors. While it can be different for each person, the strategy for choosing the most appropriate policy remains the same.
To understand “right sizing” insurance, you must first understand three basic realities:
- Term insurance is almost always less expensive than permanent (or whole) insurance when comparing the same health factors.
- The shorter duration of a term insurance policy, designed to provide coverage for a specific number of years, implies a lower probability of death and therefore has a lower premium cost.
- There is more than one way to estimate your coverage need.
Understanding Term Life Insurance as a Low-Cost Option
Most life insurance needs are finite in nature, meaning they go away over time. This is why term insurance is often the preferred option since you can select a term that corresponds to the length of time you need coverage. For example, the need to provide for the care of a newborn child could be adequately covered by a 20- or 25-year term policy, while a new mortgage may require a 30-year term.
For the full column by Greg Klingler, CFP, ChFEBC—Director, Wealth Management, Government Employees’ Benefit Association (GEBA)—see the Nov. 12 issue of FEND.