Self-Improvement and Interesting Knowledge

Life insurance is an incredibly sensitive topic. It is amazing how much emotion is generated when people talk about life insurance and whether they should have it or not.

Life insurance is basically there to provide for your dependents in the event of your death. To find out whether you need life insurance or not, all you need to do is consider for a while what would happen to those people that are dependent on you if you passed away. This is a difficult question and one that not too many people like to make, but it is a critical one if you do have family that are dependent on you.

If you do have people that depend on you, then it is my suggestion that you look into life insurance. If you do believe that you need to get life insurance, you must remember to try and stay logical and to try and not get baffled by all of the jargon. There are some key questions that you must ask yourself and depending on the answer to those questions, you need to make sure that you make the right choice for yourself and not for the insurance salesperson.

It is most important that you think right off the bat; how much money will I need? Most people will correctly assume that what they need is enough money to provide for their dependents. That is, enough money to pay for all the things that you’re paying for now so that those that you love are not left in a terrible state. For around a $40,000 a year annual income on investment, assuming a 4% withdrawal rate, you will need a minimum of $1 million policy. Essentially if you are to pass away, with $1 million coverage your dependents could survive with this million dollar investment.

The second most important question to ask yourself is; how long do I need to have this insurance policy for? And here’s where you can make some savings if you are willing to think with your head and be less inclined to be pressured into a type of insurance that you don’t need. If you think about it, your dependents are usually your children; since you are hoping that your children will be able to take care of themselves after they come of age, let’s say 18 years old or after they graduate from college, then you can start to seriously think about a term policy. This is of course assuming that you and your wife, husband, or partner have enough savings so that if you do pass away, all your joint savings are inherited by him or her and therefore your significant other is covered as well.

If you only need to have coverage for your children while they are growing, and you are confident that you will have enough savings with your significant other so that they are covered in case of an unfortunate event, then you need to seriously look into getting a term policy. Remember the savings that I’m talking about will be the amount that you think you will both have accumulated by the time you are in your 60s for example and your term life policy is over.
Why is this question so critical?

Because a term policy can cost you about 1/5 the price, or less, compared to permanent life insurance. Permanent life insurance is insurance that you pay for your entire life as opposed to term life insurance which only covers you for certain amount of time.

Permanent life insurance: this is the traditional life insurance that most people know about. You essentially buy a policy, if you make the health qualifications, and you are paying it for the rest of your life. This insurance can be quite expensive, around $15,000 a year, and any insurance salesman will make sure that they point out every single reason why you need it. The reason for this is that most insurance salesmen will make about a 20% commission on this sale.

Term life insurance: this is life insurance that only gives you coverage for a certain amount of time. You could for example have term life insurance coverage for 20 to 25 years; this would for example cover you during your children’s development years so that they are covered in the event of your accidental death, until they are about 18 to 21 years old, and they can after this hopefully take care of themselves. Term Life Insurance is usually far cheaper!

If you ask an insurance salesman what you need, they will give you every single reason that they can come up with as to why you need permanent life insurance. Unless you are part of the 1% that can use these policies as a tax shelter on giant million-dollar estates, what you actually might need is a term policy. If you are having problems with this decision then I suggest that you talk to a financial advisor, one that definitely does not get paid some kind of commission depending on what you wish to invest in.


  1. Here’s some more options to consider:
    1. Commissions are 100% FYC (first year’s commission) for term, 30% of FYC for Whole Life if it’s a lifetime-pay, even less, 10% if it’s a shorter pay period like a 10 or 20 pay.
    2. Social security is the main income source after retirement. For a couple, if one dies, you’re left with the greater of the 2 checks, essentially halving your income (at a time when older people have mortgages and other debts compared to the past – thank the FED for inflation on that one). This means there’ll always be a permanent need for life insurance (if you’re married, not withstanding other obligations one might have).
    3. At the very least, you need something small and permanent to pay for your final expenses, because term won’t last that long, and you might not qualify for it later on, in addition to it being more expensive.
    4. People can pay triple the premium of their term, and get a ROP (Return of Premium) term policy that pays them everything back at the end of the term policy if they don’t use it. Consider some of those policies now pay out if you have a critical illness, so it hits two birds with one stone.
    5. One last option is to also consider a GUL (guaranteed universal life) policy. It’s like a term and whole life combined. It doesn’t gain cash value inside the policy, so if you miss a payment like your term, it expires. But it can be designed to go till age 100 (like a whole life policy), but with a way cheaper policy.
    6. I recommend a blend depending on the priorities of the client, especially if they’re younger and it’s affordable. If they’re older and can’t afford WL, we might explore some other options (4,5 or 6).

    I just want to say, good for you for explaining this to people. Especially people in the metaphysical realm that sometimes are confused by finance. Keep up the great blog posts. I love your style (a mix of Crowley and Castaneda).

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