Fast, Easy Life Insurance for Busy New Dads

Three Major Problems with Life Insurance

The first major factor is trust. Life insurance is "for life", so you want to make sure you can purchase it from a trustworthy source. This process can take a lot of time if you are trying to vet an insurance agent first. Even if you like the agent, you have to then research the company they work for.

The second major problem is getting connected to the right insurance company for your specific lifestyle and general health condition. Think of each insurance company as having a personality. Some companies are more risk adverse than others. Insurance companies will interview you to assess your "risk profile". If your profile is not jiving with their risk tolerance, they will deny you. Many agents only sell for one company, so if their company denies you, you will have wasted all of that time building trust.

The third major problem is that the market is so segmented, with so many options and companies, it's difficult to make a decision. It becomes analysis paralysis.

The Most Important Decision to Make

I'm sure you have that family member or friend who tried to sell you whole life insurance at some point. I went down that rabbit hole and basically found that whole life insurance is beneficial after you have exhausted other government savings vehicles like an IRA and 529. Two main reasons are high fees and low liquidity.

Remember, you are signing a contract. A contract that has many conditions in order for you to withdrawal and collect your savings. Government savings are way easier to liquidate and there's no complex contract creating roadblocks to your own money. Both have fees to withdrawal early, but government savings are accessible right away, from day one.

Term life insurance is usually the best choice for a new dad who isn't maxed out in government savings accounts for the year.

I Bought Both Whole Life Insurance and Term Life Insurance. Here are a Few Important Differences.

When I purchased a whole life insurance policy, I couldn't afford high limits due to the extra payments for the savings component. I bought Variable Life Insurance (A variation of whole life. "Variable" is in regards to the rate of return. Another popular variation is call "Universal" Whole Life, which allows adjustments to premiums and death benefits so you aren't locked in.). Variable Life Insurance invests in riskier assets like stocks, so you can potentially earn more than regular whole life insurance depending on market performance. You also have the potential to earn less.

Regular whole life insurance invests into more stable investments like bonds, so in theory you receive a lower but consistent yield compared to Variable.

As I mentioned earlier, I would have been better offer If I took those extra payments and put it into a Vanguard index fund because there are less fees and the money is more liquid. I was not maxing out my IRA either.

I bought what limits I could afford with Whole Life, and then decided to purchase a 30-yr Term Insurance to fill the gap.

It's recommended that you purchase 10x your yearly spend for the coverage amount. For example, purchasing 1 million in coverage if you need $100,000 a year currently.

You could also factor in any large loans like mortgages to help you decide how much coverage you want. This is your choice, and there are no hard and fast rules. Ask yourself which amount gives you and your family peace of mind, and then factor in your budget. The worst thing you can do pay for too much insurance, and ultimately let is lapse. This is a huge problem in the whole life insurance industry because premiums are always magnified due to the savings component. That's why I bought very little whole life insurance to ensure I never felt tempted to cut out the payments.

Life Insurance is Not a Lottery... Despite Lottery Like Numbers.

Remember, life insurance is for a catastrophe. We're supposed to live until 80, and insurance companies understand that statistically, most people will live past the term policy. So, as an optimist, I like to assume that we will outlive our policy, and I don't rely on cashing out. If you understand this, you will see why term insurance is appropriate in most scenarios. Term insurance is way more affordable so you are likely to pay until the end; and it gives you peace of mind because you know that your child's most vulnerable years are safe if you happen to check out early.

Example 1. You are 35 years old. You buy a 30-year term policy. You have a 6 year old girl.

You have outlived your policy. (Yay!)

Now you are 65 years old. (Boo!)

Your child is 31 years old.

You better believe that you will have prepared your 31 year old to earn their own money at age 31. You've done your job as a parent. You will have peace even if your life insurance runs out because in theory, you were an awesome father and crushed it by raising a successful and happy child.

Example 2. You are 40 years old. You buy a 15-year term policy. You have a 1 year old boy.

You have outlived your policy. (Yay!)

Now you are 55 years old.

Your child is 21 years old.

Assuming you did a great job and raised an independent young adult, if your budget allows only for a 15-year term policy, you can still justify that at age 21, you've done your part.

The limits you choose should align with your personal values, and fit within a comfortable budget. Do not choose a monthly payment that feels uncomfortable now. You can always add more insurance later.

Where Did I Buy My Life Insurance?

I purchased my whole life insurance through my friend who worked at All State insurance. The value was just okay. I had to get a medical exam, and they ended up raising my rate because my blood pressure was on the higher side. Overall experience was time consuming since I had to drive over to the agency, set appointments, wait for the exam results, get a new quote, and then finally got my policy. I felt a little bit nervous as to whether I was making the best decision, but I knew it was better than having zero insurance. My friend ended up selling his agency, and my policy bounced around a couple of times to other companies that I never heard of before. This is how I found out that your policy can essentially be sold and traded.

I knew I needed more insurance, but I didn't know where to buy it, so at least 4 years went by without any action.

I saw that Insurance Technology companies were generating a lot of buzz, and a company name Ethos jump out. They were advertising heavily and the fact they advertised no health tests sounded too good to be true. My health isn't bad, but now I was 4 years older and I assumed my blood pressure was still not optimal.

I ended up applying on Ethos' website to see if it was affordable, and I ended purchasing my policy the same day. It was super easy and the rates were very fair. They checked all of the boxes as far using A rated financially stable insurance carriers, and I understood that their online platform meant efficiency and competitive prices.

They also had both term and whole life insurance products, so you can easily compare rates and view all of your options.

Peace of Mind Isn't Expensive.

The best feeling is knowing that you've taken the most important step in securing your child's future. Stop thinking about it, and purchase a conservative amount that you know you won't have to reassess during tighter months. Start with a little bit of term insurance, especially if you're on a budget. You will instantly feel relief.

Whole life insurance is a little bit more complex, and based on my personal experience, I left with mixed feelings after purchasing it because I wasn't really in a financially abundant state.

This means that the timing was not right and the product wasn't really appropriate for me. Whole life insurance and its variations like Variable Life, Indexed Universal Life, and any other life insurance with a savings component, in my opinion takes away from purpose of buying life insurance to protect against a catastrophe. It's expensive and your savings are not liquid for many years, locked behind a contract.

I have partnered with Ethos, and you will see my contact information on their platform in case you need my assistance. You can also contact Ethos customer support if you have specific questions around their platform or products.

Click on the banner below and take the leap!

A great weight will be lifted off your shoulder.

Thanks for reading.

Best,

Jason Kim.

Dad to an 8 year old boy!