TEMPLE, Texas — Sadly, the mortality rate of a human being is still 100%. You, me, all of us, we are going to die. And if we die young it can really hurt those that rely on us as providers.
Enter life insurance into the equation, the topic of this week's Money Talks. It can be an expensive investment or a small expense for young healthy people. Maybe you get it through your job, but you should have between 5 and 10 times your annual salary in life insurance to make sure that your family could overcome losing you. Term policies will be the most cost effective.
"Term insurance right now, it's cheap," Financial Advisor Rolandus Johnson told 6 News. "You can get a lot of it, but usually you know it runs out and when it runs out, you're going to be a lot older and it's going to be a lot more expensive to maintain a policy if you so choose to do so."
Whole life insurance will be more like an investment and it will cost you more each month but it will be there upon your death.
"The other side of the aisle where whole life is purely, it's for you there when you pass away," Johnson said. "But usually it's a legacy play a lot of people will use whole life as the whole banking concept has become extremely popular, thanks to Tik-Tok and Instagram and all of these things, but they don't tell you the whole story, a lot of times you've got to fund those things a certain way to get that benefit but whole life is usually a benefit play you know for kids, young kids."
Remember, not many people die young. This means life insurance, like most insurance, is only there if your family needed it, and like car insurance, you hope that you never need it.
"I honestly think that the stat is 99 percent of term policies don't pay out," Johnson said. "Whether they either out live them or at some point in time they will stop paying for them along the way. But then that's where 'invest in the rest' comes in, invest in vehicles such as Roth IRA's, brokerage accounts, things like that."
Johnson, or "Rojo”, kept emphasizing how inexpensive term life insurance is for a 20 or 30 year plan for someone in their 20's or 30's.
"But then you are on the other side where you've got whole life which you know a $100,000 whole life may cost you 200 bucks where a $100,000 term policy may only cost you 10 bucks a month," Johnson told 6 News.
If you are unsure about how much you should be spending on insurance, you really should consult a financial advisor and come up with a plan.
"Make sure that you are doing what's best for you and your financial picture," suggests Johnson. "That's where guys like myself come in. Like I said, young people, my advice is if you're going to do anything insurance wise, get you some term. It's cheap, it won't break the bank and then you are protected and as you grow when you accumulate things, as you grow your budget becomes bigger. Maybe look at doing some kind of permanent policy but start off with the simple stuff, term, I know that's kind of what I preach. If you don't want to go the complicated route let's get you some term insurance and we can grow from there!"
The percentage of Americans that have life insurance is right at 52%. And out of those one out of 2 Americans, 99% of all term policies never pay out a claim. This is due to most people letting their policies lapse. If you buy a $250,000, 20-year term policy, and inflation is about 4% a year, your policy will lose 56% of its value over the next 20 years.