Life insurance consumer tips: How much time is on your side?

By Steve Kobrin

The Firm of Steven H. Kobrin, LUTCF

When people buy life insurance, they must answer two fundamental questions:
    1. How much coverage is required?

    2. For how long is that coverage needed?
If you have an unlimited budget, the optimal strategy would be to buy the maximum amount of insurance that your beneficiary might need and to "lock in" that coverage at today's low guaranteed premium for the rest of your life. Your purchase could be done in one fell swoop. Very simple.

On the other hand, if you need to work within a budget, your life insurance purchase might need to be done in stages. In this case, you must ask yourself which is more important, the size of the death benefit or the length of the rate guarantee?

If you cannot have both, then which should be prioritized?

The answer depends upon your fate. More precisely, the answer depends upon your philosophical view of fate; how much control do you have over your fate?

Some people realize that, despite all their efforts to live wisely and take care of themselves, they cannot control the time of their ultimate passing. They know that a life insurance claim could be made at any time. Even today. Therefore, they live like every day could be their last day.

They make sure the maximum death benefit is in place now, even though it means accepting a shorter guarantee period on the premium.

Other people are confident that their fate is to live a very, very long time. They doubt a claim will be paid in the foreseeable future. By the time of their far off death, they reason, their need for life insurance will have greatly diminished, so the size of the death benefit seems almost inconsequential. Instead, they are focused on saving money in the here and now.

They prefer to lock in today's low rate for the longest possible period, even though it means providing a smaller benefit to their dependents.

Which approach is right for you, given your particular circumstances? Remember that prequalification can save you money, regardless of the approach you choose, and I would be glad to discuss that as well.