In an exclusive interview with Practicomm, professional John Tahmoosh provides valuable answers to controversial insurance issues…
Question #1: How do I figure how much life insurance need?
Tahmoosh: When purchasing life insurance, for the protection and security of your family, there are many variables that need to be taken into consideration. In calculating the amount that is needed, you have to consider the age of your wife and children, how much they will need to live on, if you were taken out of the picture. The amount of your outstanding mortgage, the cost of your children’s education, your credit card debt and money for emergencies, such as medical expenses or house repairs. To get a good idea of how much life insurance you need, add up all your monthly bills and fixed expenses over a three (3) month period, multiply it by four (4) then add for your children’s education and what your wife will need to live on for the rest of her life.
Question #2: With regard to term life insurance, how long do I need protection?
Tahmoosh: To determine how long you need a term life insurance policy, you need it to cover up to your youngest child is finished with college and is at least 21 years of age; and, to cover your outstanding mortgage up to the amount of years left on it. Most term life insurance policies have a maximum term of 30 years.
Question #3: Should I get a policy for my kids? If so, why?
Tahmoosh: This is a question that comes up all the time and is not as straightforward as it sounds. Life insurance is usually purchased as a salary replacement, or a tool to pay for funeral expenses. In most cases of a child, there is no salary to replace; and, with the absence of a child, your living expenses with actually drop. There are mainly two types of life insurance products, those being Term and Whole Life. Term is mainly used to pay off financial obligations, such as a mortgage, children’s educational needs and a sufficient amount of money for the family to live on, if the breadwinner is taken out of the picture. Whole Life Policies accrue a cash value during the life of the insured. For example, my father purchased a $5,000 Whole Life Policy at my age of three and continued purchasing a new one each of the next four years. Today at my age 50, the Cash Value in my policies exceeds $75,000 and I haven’t paid a premium in the past 25 years.
Question #4: What does “guaranteed” mean when you are talking about a premium?
Tahmoosh: When a life insurance policy is written on a whole life or term insurance basis where the premium is guaranteed, it simply means that it will never change during the policy period…up to the maturity date of the policy.
Question #5: Why do people convert their term policies to whole life?
Tahmoosh: When you are considering converting a term life to a whole life policy, there are many different factors to take into account, including your current budget, your need for flexibility, and the financial obligations your family will have in the future. There are several good reasons why it might be a good idea to convert a term policy to whole life; your health has deteriorated and you might not be eligible for affordable life when your term life policy expires. You need life insurance longer than you initially expected and you want a policy to cover you for the rest of your life. You may have purchased your term policy when you were younger and it was all you could afford at the time.