We're looking forward to going through some of the basics of life insurance and helping you think through who needs it, what are the different types, and how you can calculate your needs.
Life insurance is not less important, it is but a little bit more basic than disability insurance. It’s not quite as complex as far as features and how to compare.
But it is something that can be tricky from time to time, so learning about your need for it and what types there are is still important.
Let's start off by looking at whether or not you need life insurance.
So I will tell you that after working with doctors for many years, life insurance is something that appears to be a no-brainer for most doctors.
They know that they need it, they want it to protect certain people or certain aspects of their lives.
But do you need it? I would say a resounding yes. You have a lot of interests, a lot of people who are invested in you and your income and your work, so you want to make sure that you're protecting those people.
But what it really comes down to is your peace of mind.
If you're married, typically that means that you want to have some life insurance.
Obviously it will cost money to bury you, but not much, so having a little policy for that makes sense. And clearly it’s extremely important to have coverage if you’re the majority breadwinner.
But it’s important even if you’re not the majority breadwinner, it’s still good to have a life insurance policy.
Let’s say that your spouse brings in 70 percent of the income, and you’re bringing in 30 percent. Much of the time, that 70 percent will cover basic needs.
But it’s the 30 percent that fuels your lifestyle: what neighborhood you live in, what kind of house you have, what school your children go to, what vacations you take, all of those things.
And so the point is that, even if you died and your spouse was still there, your spouse may want to take off work for a year, your spouse may want to do a totally different job, we've seen that happen.
So if you're married, you want to give your spouse some death benefit if you die so they have the flexibility to cope with it financially in an easy way because they're going to have to cope with it emotionally.
The last thing you want is for them to be put into financial hard times where they're having to move or change their whole lifestyle, and you want to be able to protect them from that.
If you have children, they're counting on your income to provide for them, to feed them, to house them, to educate them—everything they need to get them out of the house. And so anytime you have children it’s a red flag if you don't have life insurance.
You absolutely have to have it if you're a small business owner. There are a lot of people counting on you to help that business run and to open up opportunities.
If you own your own practice, or you're a partner in a practice, you are very important to a lot of people in that practice so keep in mind that there may be some institutional interest in having life insurance to protect them in case something happens to you.
If you have other dependent family members, whether it's parents that you're taking care of or siblings or anyone else, they would be a reason for having some life insurance.
If you have significant debt it’s important to have life insurance. When you pass away, some debt gets forgiven but a lot of it—like a mortgage—doesn’t go away, and so you may leave family members, spouses, parents, whomever else with significant debt.
You want to make sure that any debt gets paid off by you with some life insurance proceeds and doesn't financially hinder your loved ones.
If you're retired a lot of people say that you really don't need life insurance. But once you're retired you have a legacy of work and you may have grandchildren, so you might want life insurance to do things like fund education for your grandchildren or to set up some type of an endowment or a grant that can be used to further your legacy.
And plus there's estate taxes to worry about. We won't go in depth on that here, but when you pass away your estate is going to get taxed if it's above a certain size.
A lot of doctors will have life insurance to replenish what gets taken out in taxes so that a fuller amount of their estate does get passed on to the future generations after them.
And finally, what does life insurance actually do? I think a lot of you understand that if you die and you have life insurance it pays tax-free proceeds to your beneficiaries: to a spouse, to children, to whomever.
What does it really do for you though? It doesn't do anything for you necessarily by paying a death benefit, because you won’t be around to use it.
But I'll give you one quick story. We a husband and wife pair of clients that were physicians, and we helped him to get the right kind and amount of coverage.
They had children and they were going to travel overseas and leave the children in the States because the children were fairly young.
I'll never forget that they called me right before it to make sure that their disability and life insurance policies were all lined up.
And I said it was, and so I was able to give them that peace of mind.
I thought it was interesting they were calling a day or two before they were about to fly out for a couple of weeks.
And the wife say, “I just wanted to make sure that, if something happens to us, my kids will be protected. It’s making this trip a whole lot easier knowing that if were something were to happen to us, our children are going to at least be provided for financially.”
Life insurance provides peace of mind, which is a wonderful benefit separate from the actual mechanics of the insurance.
Life insurance will not only protect your loved ones if you pass away prematurely, but it will also provide great peace of mind as you go about your life knowing that those you care about are protected financially if something unforeseen happens to you.