The first quarter of 2010 has seen an sharp increase in the number of life insurance policies purchased, compared with the first quarter of last year. ?It does make sense that after the economic problems of the last couple years, that people would be more focused on managing risk now than they were before the recession. ?Term life insurance is especially appropriate now for risk-averse clients, as it is an inexpensive way to provide financial security for one’s family, without concerns about stock market volatility.
Certified financial planner Carl Richards had a great article on the New York Times blog last month, about why life insurance shouldn’t be treated as an investment. ?The napkin drawing is chuckle-worthy, but it also makes a really good point: ?for most people, it’s a better idea to keep investing and life insurance as separate entities. ?There are exceptions, such as people who need to generate cash upon their death to pay estate taxes on assets like real estate or a business that they would like to pass to their heirs without selling. ?For situations like that, the financial obligation won’t diminish over time and the life insurance policy needs to be permanent. ?But for most people, the need for life insurance does indeed diminish over time as children finish college and mortgages get paid off and net worth grows. ?For many people, the need for life insurance after retirement is low, as there is no longer an earned income that would need to be replaced.
For people who still have many years of work ahead of them – and many years of financial obligations – now is a great time to look into securing life insurance. ?A term life insurance policy will allow you to lock in the premium based on your current age, and is a great way to protect your family’s financial future without taking financial risks.