#008 – On this episode, Mayra reviews if you need life insurance, why employer-sponsored life insurance isn’t always enough.
[0:00] I’m going to be covering why life insurance is important to have as a part of your financial plan. And why not all life insurances are created equal and which one you should choose. Stay tuned.
[0:13] Welcome to Debt Free Latina, the podcast where you can finally realize your dream of being debt free and feeling peace about your financial future. And now your host, Mayra Alejandra Garcia.
[0:33] Welcome. Thank you so much for tuning in. I am so happy to be back on the mic, and today I’ll be covering a really important topic. I’ve been messaged a few times on Instagram about life insurance and which one is best. It’s really good to understand how much is necessary, and the two types of life insurance that are the most popular, explaining why one is better than the other. I think life insurance in general is a really important part of your financial plan, and you should definitely have it. Now, one of the reasons that it’s important to have, is because you should have life insurance outside of your work, because if, God forbid, you have an accident or you become ill and unable to work, and your employer ends your employment. Then, there goes your employee sponsored life insurance benefit as well. So it’s important to have life insurance outside of work. Now there’s a lot of different life insurance companies, and it’s important to go with a broker. I know there’s Primerica and the World Financial Group and there’s all these other non-broker, life insurance sellers, and those are not always the best options, even though they sometimes sell term life insurance, which I recommend, but I would suggest that you price this out and you shop it, and you don’t just go to the first person that came to you, or your friend of a friend that is selling it, and that you really do some research.
[2:13] So first I want to describe the two different types of life insurance. There’s term life and there’s whole life. And with term you purchase life insurance for a term. So for a certain amount of time, so usually that’s like 20 or 30 years. Now, whole life insurance is like for your whole life, you pay it forever, until you die. And sometimes you have term with cash value attached to that. So I want to talk about the term, and why I recommend that. Most people only need life insurance for 20 to 30 years, roughly, and that’s while you get out of debt while you build wealth, and you can self insure where you don’t need to buy every type of insurance there is out there. So for example I don’t recommend you buy insurance on an electronic at Best Buy. If you can pay it outright, you should self insure and so same thing applies with life insurance. If you have enough money to support yourself for the rest of your life, you don’t need life insurance anymore. And usually when you’re building wealth, it’s like when you have children, when you have a family, when you have people that depend on you. And so understanding that you don’t need life insurance forever, is one of the reasons why I recommend term insurance. Whole life insurance, you’ll pay forever, and it’s not the best option, it’s actually one of the most expensive ways to get life insurance. I know there’s term with cash value benefits, and when you buy something that has a cash value attached to it, or if somebody tells you, well if you don’t die in 20 years, we’re gonna give you all your money back. Well what they’re doing is, they raise up your rates, it’s more expensive. And yes, you’ll get some of your money back, but you could have made so much more money if you paid a regular term insurance and invested the difference into the stock market and your rate of return is higher. So I don’t recommend the whole cash value attached to stuff. I think it’s one way to get people to buy that and to see a benefit in that. They’re the ones making the interest on the money, and that’s why it’s worth it to them. It’s not the best option.
[4:36] So, take my word for it, don’t get the cash value stuff, buy the most least expensive, term life insurance for the amount of time that you suspect you will need in order to get out of debt, and to build a little bit of wealth, and usually that’s about 20 years. So if you follow the plan, and you get out of debt, you pay off your house in the next couple years, because you got a 15 year loan then, maybe 20 years out is all you need.
[5:04] Now, there is… I’ve had people ask me, who needs life insurance? And I would recommend that you have life insurance if you have dependents. If you do not have dependents, it’s not really necessary, to be honest. You should consider leaving assets to your family or to… let’s say you bought a house and you’re single, it would be wise to buy life insurance to pay off the house, should you pass. And that somebody in your family is able to pay off the house, and keep it as an investment and asset, and leave a legacy that way. But that’s not really necessary. I think that’s a personal choice. You should have the ability to keep the lifestyle that you currently have, if you have children. So, having about 10 times your income in life insurance is what your family should have, if you have a husband and/or children. So that’s usually the rule of thumb, and you should see that if you have children, you should add them as a rider on your life insurance. Usually they’re covered at about $10,000, and the reason that’s all you need is because it’s about how much it cost for final expenses for a child. A child usually doesn’t bring income and so you don’t need to have more than final expenses covered.
[6:37] I’d love to know what other questions you might have about life insurance and I’d love to do a part 2 of this episode and have a follow up to this, so that I can cover this topic in a more deeper level, and I’ll see you in the next one.
[6:57] Thanks for listening to Debt Free Latina. Make sure you hit that subscribe button so you can take Mayra with you on your journey to become debt free as you build financial wealth. Looking for more? Follow Mayra on Instagram @debtfree.latina, on Facebook @debtfreelatina, and online at debtfreelatina.com.