Include life insurance in your ‘must have’ budget

As you re-examine your monthly expenses to cover the escalating costs of food and fuel, it’s important to consider life insurance in your plans. While it may be tempting to think a life insurance policy is out of reach in today’s economy, it’s actually more affordable than you think — especially if you plan for it in the same way you budget for everything else.

The reason for doing so is simple. Most of us dream of being financially secure to enjoy life’s pleasures and to protect loved ones. We all hope to achieve milestones such as purchasing a home, having children, enjoying vacations, sending the kids to college and having a nest egg for retirement.

We also have the best of intentions to save and put money aside if emergencies arise, but as we all know, it’s very challenging. However, preparing a financial plan can help you navigate through life’s events to achieve these goals. A critical component of a sound plan is life insurance, the backbone of financial security.

“As the saying goes, it’s always better to be prepared, and life insurance can help you plan for the unexpected,” says Christopher Pinkerton, president of the United States division of Foresters, a leading fraternal benefit society that provides members innovative life insurance products and membership benefits. “People often believe they can’t afford this type of protection, but in reality, they can’t afford not to — it ensures financial security for both today and tomorrow.”

Life Insurance Costs Decreasing

As the cost of everyday essentials rises — from gas to groceries — you’d think the cost of life insurance would, too. However, the average cost of term life insurance has decreased significantly in the past decade, according to statistics from the Insurance Information Institute.

For example, a 40-year-old nonsmoking man healthy enough to qualify as a standard risk paid $1,300 per year for a $500,000, 20-year plan in 1996. In 2008, a man in the same circumstances could expect to pay $725 per year.

Why does life insurance cost less today? The good news is people are living longer due to positive lifestyle changes and improvements in medical technology. The average man will now live until 75 instead of 70. The average woman will live to 80 instead of 77, says the U.S. Department of Health and Human Services. Increased life expectancy has resulted in lower premium rates.

Budget-friendly Protection

How do you put aside money for life insurance when your wallet is already being stretched? Start by creating a month-by-month budget, setting a savings goal and projecting your financial needs. A qualified professional financial advisor can help you assess your situation, determine future goals and show you how to achieve these milestones.

Minor adjustments to everyday spending habits can also have a big impact. For example, if you choose to carpool to save on gas, consider a similar adjustment to pay for life insurance, such as going out to dinner less often. Say you eat out once a week and the bill averages $50. By sacrificing one dinner a month, you can afford a quality life insurance policy and provide needed protection for you and your family.

“By investing a relatively small amount monthly for a quality life insurance policy, you are taking a positive step toward ensuring that your family can keep the house, send the kids to college or sustain the family’s livelihood if there’s a loss of one or both income providers,” says Pinkerton. “Some life insurance products can also provide savings and investment options for a home, a family bequest or even a vacation.”

Including life insurance in your budget can help keep you and your loved ones financially healthy for whatever the future may bring, filling the gap between financial needs and financial realities. Everyone, no matter whether you are single, married and starting a family, or entering retirement, needs life insurance because it provides financial protection for an uncertain future.

Where to Start

A good first step is to try an insurance-needs calculator to estimate how much life insurance you may require. Conventional wisdom recommends households should carry anywhere between five to 10 times their annual income in life insurance. You can find a calculator at: www.foresters.com/calculator.

Following this, find a qualified financial professional you can really talk to who understands your needs. A customized approach, identifying financial goals and priorities, as well as an analysis of your financial needs and risk tolerance is a critical part of the process. From there, you and your advisor can decide what type of life insurance and how much is right for you.