We typically fail to realize we lead two financial lives. One as the ‘Tortoise’ and one as the ‘Hare’.
The Tortoise feels money will be acquired over time. Slow and steady will wins the race.
The Hare wants financial success right now. Little or no waiting, just give it to me now.
The Tortoise has its shell to protect it from the elements and enemies.
The Hare must move quickly to protect itself from the elements and enemies.
Why are we both?
Education is the slow and steady process of gaining knowledge of time.
Though we never stop learning, we use our basis of knowledge to make critical decisions. Career choices, personal relationships and key financial decisions are examples.
But we can play the lottery while having a long term savings plan. Have both aggressive high yielding investments and low risk investments for steady growth. Acquire inexpensive term life insurance coverage, or whole life coverage that grows with you.
The life insurance Tortoise (Whole life insurance) – uses the endurance strategy of slow, steady growth and protection. Though the coverage is immediate, the savings component grows over time.
The life insurance Hare (Term life insurance) – spends pennies per day to obtain a great amount of protection. Term policies typically start with a minimum of $250,000 of coverage.
Can you afford coverage?
May be the better question is can you afford not to have it. Reasons you need life insurance:
- Living paycheck to paycheck.
- Have a job and pay bills.
- Have a spouse or significant other.
- Have children.
- Seek to retire financially free.
- To avoid the costs of a catastrophic event.
- To start a business.
- To finance a home.
- To finance an education.
- Pay off a student loan.
- Leave a legacy.
- Have tax-free income in the future.
- The wealthy use it for protection and a hedge against financial loss.
- The list goes on, (etc.)
In a nutshell, life insurance can be used to protect income, assets, and be used as a long term savings plan to build tax-free wealth. – The Tortoise strategy.
Cheaper than you think
- Life insurance can cost less than 50 cents a day.
- The costs for a term policy for an adult thirty year old or younger can be as little as $19 per month for $500,000, twenty years of coverage.
- A forty five year old as little as $44 per month for a $500,000, twenty year policy.
- Insurance is typically cheaper for a woman than a man.
When should you get it?
The younger the better! Ideally, after you start your very first job. The sooner you start the cheaper the cost. But if you’re seasoned professional and you don’t have it, obtain it as soon as possible. The cost of life insurance is based on your life expectancy. Additionally you never want to be in a situation where you become uninsurable. So while your healthy, it is time to get it. Insuring yourself now or significant other lessens the probability of not being able to insure later.
Manage it like other monthly fixed bills. Have it deducted automatically for your bank account. Let it do the job of quietly protecting you in the background. Use it when you need it. That is when you will really appreciate the fact that you have it.
What’s the difference between term and whole life insurance?
Term Insurance: As indicated in its name, it is for a fixed period of time. Typical coverage is for: 10, 20 or 30 years. Because it is temporary the cost of coverage is much cheaper than whole life insurance.
Whole Life Insurance: Is protection for your whole life. Though it is the most expensive insurance you can buy, it can provide the following benefits that term insurance does not:
- Tax-free loans and tax-free income that may be used to pay other expenses. Examples: education, car, house, or start of a new business. If taken as a loan, the interest rates are typical very low and you can choose to pay it back or reduce the value of the policy.
- At policy maturity, withdrawals from the policy are tax free and repayment is not required. It simply reduces the value of the policy.
- It offers an opportunity to build true wealth that can be passed on to love ones when you pass. It is an investment in your future.
- Every dollar you put in to it, you can get back.
Start building your base
All savings plan should include life insurance. When you build a base you must protect it. Insurance can do that. It is a passive way of putting the Moneyworker to work.
If you still think you don’t need it
Known as the “Everything is going to be alright philosophy.” But that’s the point of life insurance. Insurance is a written agreement against loss. Buy it when it’s just a few dollars a month. As in the earlier example, cost might be as low as 1% of your monthly income. If your take home pay is $3,000 a month, life insurance could be as low as $30.
Or:
If you have coverage through an employer, reconsider the policy. These policies are typically no more than twice your annual salary, which means it only provides up to two years of income protection. They are no longer in affect if you switch jobs or get laid off. Thus one of the points of insurance is to protect whether you’re employed or not.
While you may be finding reasons not to have it, think the opposite. Find ways to plug it into your monthly costs. Have the protection and possible financial growth. Simply set it and forget it until you need it.
And the winner is…. You!