by John Bair

What will your family do when “life happens?” Working in the settlement planning field for almost 20 years, we’ve seen practically every dire situation happen to families. Less than one percent of these families were financially prepared for it. Life insurance may be the most misunderstood and underappreciated financial security blanket.

But why is that? Perhaps it’s the public’s perception of the industry at large, or the professionalism of the people whose responsibility it is to sell insurance, or maybe it’s the basic instinct against buying something you definitely don’t want or need—and that it’s morbid—as to why most people just avoid it.

We readily insure our vehicles and homes, businesses and other valuables. Why is the additional step of getting life insurance a challenge? According to, a not-for-profit geared toward providing basic information for families, only 39 percent of Americans carry any coverage. In fact, half of all millennials say they have never even been approached by someone to consider life insurance.

After all of these years seeing people underinsured or uninsured, I think the best way to think of this type of coverage is as a big step in financial maturity. It should be one of the first things you buy in life (preferably permanent coverage) as it’s inexpensive, and it starts the ownership mentality, which is so important to creating an “accumulation” mentality for living and creating wealth. It’s not what you make; it’s how much you save. A permanent insurance contract early in life is an investment. It will provide you coverage throughout your life, especially in the years when the death benefits are critically important, and it’s guaranteed to grow at five to six percent for your entire lifetime. MassMutual, Guardian, Northwest and New York Life are the most competitive and mature companies.

So how much insurance do you need? Perhaps the very question is the problem with the industry. Most people buy term life insurance, justify it for its low cost, and never see a dime of their premiums.

By the time people are 35 or 40 years old, are married or have children, the feeling of being responsible for someone else typically drives people to take out a 20-year term. If you make $250,000 a year and want to replace that income for your family, you will need $3 million to $5 million in term coverage. The problem with this scenario is that by the time you are aged 50, your term is expiring, and taking out additional coverage will be insanely expensive.

That’s why buying early in life and buying permanent makes sense. Talk to people in their 70s that have paid up policies. They will attest that it feels great to know that they will be able to leave something to their family, and it doesn’t cost them anything. It becomes a “life asset.”

If you missed the chance to invest early in life and still need coverage, then term coverage is probably the best. Only pay for what you need. A good rule of thumb is for every $50,000 of income you need to replace, you should buy $750,000 to $1 million in term.

To keep the process simple, have your broker show you comparisons from the top seven carriers that are competitive in your state. For good term coverage, you may find real value in older, smaller carriers who have a history of financial strength. Their terms rates are often only distributed through their brokers. Companies like Vermont National and William Penn can serve up some of the lowest costs.

As they say, there are no guarantees in life except of death and taxes. Why not at least make one of them a financial strength that you leave to your loved ones?