MYM #011: Do You Need Life Insurance?

In this week's newsletter, we're diving deep into a crucial question: Do you need life insurance? We'll cut through the clutter and provide you with a concise guide to help you determine whether life insurance is a smart financial move for you.

Before you freak out and close this email because you hate even thinking about life insurance, just hear me out! (I currently imagine you all opening this email and immediately doing the Michael Scott "No God Please No, No NOOOOOO!)

Just trust me here - you are going to get some value from this one! We'll guide you through the decision-making process regarding life insurance. We'll explore its various aspects, helping you assess whether it aligns with your financial goals, family situation, and long-term plans.

The question of whether you need life insurance is a pivotal one with long-term implications. Our hope is by the end of this issue - you can make an informed decision that brings peace of mind and security to you and your family.

Many individuals fail to grasp the significance of life insurance or misunderstand its purpose. In our opinion - this comes from the fact that insurance is always something you pay for with hopes of never using.

Obviously life insurance takes that one step further - nobody wants to pay for something that only pays out when they die!

Key Points:

1. Understanding Life Insurance

2. Assessing Your Needs

3. Making an Informed Decision

Understanding Life Insurance:

The first question that needs to be answered, is why? This is a loaded question in a sense - but the best way I can summarize is the following. The reason you need life insurance is to ensure all of the things that you had intended on taking care of in your life are still done in the event of your passing.

This can include paying off your home, taking care of your spouse, paying for children's education, or any other goals that you had planned in your life. 

We have seen way too many cases where someone wasn't properly insured, and sadly or suddenly passes away. This then creates a burden on your family who now has to try to adapt to a new lifestyle, while trying to make ends meet without your income. The last thing you want is to leave your family in an extremely tough financial position because you didn't have all of your ducks in a row.

We know it's not a fun thing to think about, but the harsh reality is that it does happen and people need to be aware of these situations so they can learn from others mistakes!

So, let's dive in. One of the first things people ask is: "I've heard there are a few different types of life insurance. So what type should I get?"

Here is a brief outline on the different kinds of insurance & a few details about each. 

1. Term Life Insurance:

• Provides coverage for a specific period, such as 10, 20, or 30 years.
• Typically offers lower premiums compared to permanent life insurance.
• Designed to provide a death benefit to beneficiaries if the insured passes away during the policy term.
• Does not usually accumulate cash value.

2. Whole Life Insurance:

• Offers lifetime coverage as long as premiums are paid.
• Combines a death benefit with a cash value component that grows over time.
• Generally higher premiums compared to term life insurance.
• Provides the potential for dividends and the ability to borrow against the cash value.

3. Universal Life Insurance:

• Provides flexible premium payments and death benefit amounts.
• Offers a cash value component with the potential for investment growth.
• Allows policyholders to adjust premium payments and death benefit as needed.
• Interest rates and investment returns may impact policy performance.

4. Variable Life Insurance:

• Offers a range of investment options within the policy, such as stocks, bonds, and mutual funds.
• Cash value and death benefit can fluctuate based on the performance of the chosen investments.
• Provides potential for higher returns but also higher risk compared to other types of life insurance.

5. Variable Universal Life Insurance:

• Combines features of both universal and variable life insurance.
• Offers flexible premium payments, adjustable death benefit, and investment options.
• Cash value and death benefit can vary based on investment performance.

As you can see - there are tons of different options, and I'm sure a lot of this insurance jargon doesn't make a ton of sense right now! No worries at all if it doesn't.

Here is what you need to know - for a LARGE percentage of people, all you need is basic term insurance. It is going to be cheap, cover everything you need, and give you peace of mind in knowing you have this checked off your list.

There are some situations where a permanent policy can make sense - but we aren't going to dive into those today.

To summarize here - the reason we need insurance is to make sure we are not leaving our families with the burden of paying off our debts, or putting anyone else in a bad financial position because we weren't prepared for a worst case scenario. 

"Failing to Prepare is Preparing to Fail"

Assessing Your Needs:

Figuring out how much insurance you need is the most important part of this whole equation - as we do not want to be over or under insured! So - what should we consider?

We are going to use the DIME formula - which is an awesome general rule of thumb to follow relating to assessing what you need.

Debt: Calculate the total outstanding debts, including mortgages, loans, credit card balances, and any other financial obligations. This helps ensure that the policy's death benefit can cover these liabilities, preventing a financial burden on surviving family members.

Income: Estimate the individual's future income that would be lost due to their death. Multiply their annual income by the number of years their dependents would need support. This helps replace the income that the family would have relied upon. Typically, people who are married like to cover somewhere between 5-10 years.

Mortgage: Determine the remaining balance on any mortgages. Ensuring that the life insurance payout can cover the mortgage helps prevent the risk of the family losing their home in case of the individual's passing.

Education: Estimate the cost of education for dependents, such as children's college tuition. Factoring in these expenses ensures that the life insurance benefit can provide for educational needs.

By adding up the estimated values for Debt, Income, Mortgage, and Education, you can get a rough estimate of the amount of life insurance coverage that might be appropriate for your situation. It's important to note that the DIME formula provides a basic starting point and should be adjusted based on YOUR circumstances, such as specific financial goals, existing savings, and other factors. 

It's up to you to figure out how many of these things you want covered, and what is most important to you. These are not "mandatory" but simply recommendations as people usually don't realize how valuable they are to their families in a financial aspect!

In our MYM course, we have an awesome pre-built section where you can simply plug these numbers in & it will spit out how much insurance you should have based on your situation & goals!

Making an Informed Decision:

Once we have figured out the type of insurance we want to go with & the amount we need, it's simply time to execute. 

Before we do that - there is one last thing we want to check on! Your employer likely offers you some kind insurance at the moment. The problem with this is the traditional insurance they offer is probably only 1-2x your salary. So if you make $100,000 for example, usually we will see an employer policy that would pay out $150k or so.

Obviously - based on what we have learned today, this isn't sufficient coverage (unless none of the DIME formula applies to you) which is why it's important to explore outside coverage like we are talking about today.

The positive part of that coverage is it still counts! So for sake of round numbers let's assume this sample individual needs $1 million total to feel good about everything covered in their life. If they have $150k through their employer, they only now need $850k outside the workplace which will naturally be less expensive than the full $1 million.

So once we have fully explored all of the above and know what we want, now we just have to get some rates from different carriers & go with the best option!

Our recommendation would be to work with an independent agency who has access to all of the carriers out there. Naturally they will be able to help you get the best "bang for your buck" & will guide you along the whole process. Independent agencies are awesome in our opinion because they are not tied to any specific company, so they are simply trying to find the best fit for you.

We do not sell insurance, but we have many friends in the industry & are happy to introduce you if you are looking to explore this path! Like all financial decisions, this is an important one. We want you to be as informed as possible & know everything you need to know before making the decision that's best for your family.

The last thing to remember is the following. Today's assessment of where you stand may be extremely different from where you'll be in 10-20 years. Who knows what is going to happen in your life. Maybe you'll need much more insurance at some point, or maybe you won't need any!

It's important to be constantly re-evaluating every few years to make sure you have all of your bases covered. Having that financial clarity will make you feel much better about your overall plan & knowing your family is taken care of.

Actionable Tip:

Take a proactive step towards securing your family's financial future by applying the DIME formula. Start by listing your outstanding debts, calculating your future income needs, estimating your mortgage balance, and projecting education costs for your dependents.

With these figures in hand, you'll have a clearer understanding of the life insurance coverage that could provide the necessary protection for your loved ones. Remember, regularly reassessing these factors and adjusting your coverage as your circumstances change ensures that your insurance remains aligned with your evolving needs and aspirations.

Whenever you're ready, there are 2 ways we can help you:

​1. The Master Your Money System: Transform your personal finances into an automated machine with our Master Your Money system. This comprehensive video course will teach you the automated system we use to serve our millionaire private client base to maximize every dollar earned.

2. Become part of our private client group. If you’re in your 30’s or 40’s, earning more that $150,000 of income, and looking to maximize every dollar earned, but need speed and convenience, consider booking a meeting with us to see if we should join forces to work one-on-one.