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If you disappear off the earth in an untimely manner, then your family, they need your salary replaced in your absence, and that's what life insurance is for. Welcome to Stay Wealthy San Diego, a show for successful professionals doing all the right things with their money and are ready to take their financial plan to the next level. I'm certified financial planner, Taylor Schulte, and I'm here to teach you advanced financial planning strategies in plain English. ♪
This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services. Welcome to the Stay Wealthy San Diego podcast.
John, what's our topic today? Our topic today is 529 plans, college savings plans. Actually, it's not. I do not know what today's topic is. Today, we are actually talking about life insurance. I like it. We're going to tackle a few things. We're going to tackle one, why we buy life insurance to begin with, and then how you know when you need it.
And then two, discuss the different types of insurance. Specifically, we're going to zone in on term life insurance and whole life insurance, since those are kind of the two most popular insurance.
And then three, we're going to talk about how you can make sure you get a good deal when you're buying insurance, how to shop for it, what to look for, some resources that are out there for you. I love getting a good deal. And then make sure you stay until the end because we're going to share with you why you might not want to buy life insurance through your employer. And then also how you can locate a lost employee.
insurance policy. - Wow. - Free money. - I like that. - All right, before we dive into life insurance and everything I just talked about, we've got a listener question. It's a really good question and we're gonna start with that. So John, why don't you read that and we'll tackle it. - Great. So Brad up in Carlsbad writes, "My first grandchild was recently born." Well, congratulations, grandpa. "And I want to start a college savings account for him
I've done some research and it sounds like a 529 account is the best way to go, but there are so many state-sponsored plans to choose from, I'm not sure which is best. Also, is there a particular way I should be setting it up, seeing that I'm the grandparent and not the parent?
just to make sure the funds are used properly? This is a really good question. Lots of good sub questions and there are lots of good stuff to tackle here. Yeah, the 529 world can be really confusing. You say, okay, I need a 529 account and you search around and you're like, wow, every state in the United States has their own plan. Which one do I choose?
Let's start here. A 529 account is appropriate for most people. I would definitely say so. If you have a college savings goal, there's some special tax treatment that you can get with a college savings account, a 529 account, that it may make sense not to pass up on. Yeah. So I think Brad landed at the right conclusion that 529 account is appropriate for most people. It's easy to access. It's relatively cheap. It accomplishes the goal of saving for college.
Sometimes we get like that business owner, entrepreneur client that's like, well, what if my child or grandchild wants to start a business and follow in my footsteps and we have all this money in a 529 account? In that case, maybe a 529 isn't appropriate or maybe you want to split the savings and you put some money in a 529 and some money in a different type of savings vehicle for that child. But for most people, the 529 account is the best solution because
Contributions to 529 accounts, and this is starting to answer Brad's question, in California are not tax deductible, right? That is correct. So for example, my brother, he lives out in Massachusetts. He does get a state income tax deduction for using the state's 529 plans.
So the good news is that there is a 529 plan in Massachusetts that is low cost. But since we're in California and there is no state income tax deduction, then we just want to find a great low cost plan. Yeah. So I mean, you can shop the entire market and go and find the best plan at the best price that suits your needs. And number one, yeah, you do want to look at costs. And then you might look at how simple and user friendly the dashboard might be, maybe how many investment options there are.
Brad, the good news is that in California, we actually have a pretty good plan that the Scholars Share 529 plan. It's actually a pretty good plan.
You do have to be a little bit careful. They do have these active strategies in the scholarship plan that can be more expensive. The good news is that they do have passive strategies that are much less expensive. So just look for that word passive. If you do end up using the scholarship 529 in California and make sure you use those passive investment solutions and don't get suckered into those high cost active solutions.
Absolutely. But again, since you're in California, you don't have to use a California plan if you don't want to. In fact, I'm not even sure if there is a benefit for using a California plan. So one plan I do want to give a shout out to because it's absolutely fantastic is the Utah State plan, just because they have some great low cost investment options. Yeah, I think the only reason why you might just use the California plan is if the tax law has ever changed. If they ever did, you're already set up in the California plan and...
You don't have to move it. But of course, if you set it up in the Utah plan and California adopts tax changes, you can always transfer that to the California plan and you'll be on your way. But that might be the only reason. In summary, if you live in one of these states that does have a deduction for contributions, make sure you use that state plan. Arizona is another example. If you're in Arizona, choose the Arizona state sponsored plan option.
And then his last question, his last question is really good. And I know we've tackled this before, at least in some of our writing, but he asked, he's the grandparent here and wants to help save for the kid's education. How do you open the account? Who should be the owner? Who should be the beneficiary? Should it be the parent? Should it be the grandparent? And actually there's some really, really important things to know here. Yeah.
We did do some writing on this. So now I got to say, we'll link it in the show notes, which is my favorite thing to say. But with that out of the way, let's talk about why you may not want to set up the account yourself and instead have your child, i.e. your grandchild's parent set it up. So there's,
certain particular circumstances where if you look at the way financial aid is calculated, it can make more sense. It can be more advantageous to have the parent be the owner of the account rather than the grandparent. It's just the way the financial aid numbers are calculated. It's more in your best interest as a grandparent
to have the parent as the owner of that account. Now, of course, this can open up a whole can of worms if your child, again, your grandchild's parent, isn't super great with money because at the end of the day, you're just gonna give money to your child and have them open up a 529 and invest it. So long as your child,
is able to invest that money into a 529 account per your wishes, then you should be good. Now, of course, if maybe your child isn't the best with money, then it may make more sense to have the account open in your name. Yeah. So maybe I'll back up and summarize. When you open a 529 account, you need to choose an account owner and an account beneficiary. The owner is going to be a parent or a grandparent, and then the beneficiary will be the child.
So like John said, it's usually better for the parent to be the account owner and not the grandparent.
If you're worried that giving this money to your child, you don't trust that they're going to do the right thing with this money or they might use it for something else. You can always tell the parent to go open up this 529 account in their name, name the child as the beneficiary, and then you can deposit checks directly into that account. So you can call them and say, hey, give me the account number. Where is the account held? Maybe it's at Fidelity or Vanguard or Schwab. Get the account number from them. And you can actually, we have clients that do this physically go to the brand.
and deposit the check themselves into that 529 account.
I actually, I got a little fancy with it. I bought the domain name for my son. And if you go to www.mysonsname.com, it redirects to his 529 page. So anybody can go to that website and put money in his 529 account. So I love that idea. Yeah. I got a little nerdy with it, but it works really well. And grandparents know that they can put money in there. And so it kind of solves that problem. But if my dad puts money in this 529 account, I mean,
it is my money. I'm the account owner. And if I want to pay the taxes and penalty to take that money out, I can certainly do that. Now he wouldn't be very pleased about that, but I mean, really he is giving money to me as the account owner to send my child to college. So it is better for the five 29 account to be in the name of the parents and
But if that just makes you nervous and you don't want to do that, then your only other option is to put it in your name as the grandparent. But just know that there's some issues with that with financial aid. One more thing I want to add about beneficiaries for your 529 plan going to the issue of should I put money into a 529 plan or not, or maybe just in a plain vanilla regular taxable account. Know that you can always change the beneficiary on a 529 plan. Right.
We actually had this happen with a client recently. They have, gosh, I want to say, what is it, four kids and they're all going to various schools. One of them got money in terms of a scholarship, so they didn't need the money in the 529 account. But our client, the parent of the kid decided, well, I'm going to go back to grad school. And boom, we just updated the beneficiary on the account. And now she's able to take that money out and get a master's degree. Yeah, no, really good point.
All right. As you can tell by now, we are very bad at answering questions really succinctly. I like to really dive into this stuff. We'll definitely have an episode dedicated to 529 plans in the future, and we can talk a little bit more in depth about that. But we have a lot of things to talk about in regards to insurance. So let's dive in.
As always, I've got a quote or a statistic for you that I found really interesting. A report found that 25% of people who buy life insurance stop paying on the policy in the first three years. Wow. By the 10-year mark, almost 50% of people stop paying the premiums. Wow. So they pay these premiums, sometimes very large premiums.
for 10 years and then they just stop paying and then they get absolutely nothing for paying those premiums except they paid a salesperson's mortgage for 10 years this is for all insurance or just for permanent life all insurance yeah i mean even if it is just a cheap term insurance policy maybe somebody forgot and didn't pay their premiums or even 50 a month for a cheap term policy can start to add up and somebody decides they're going to just go ahead and risk it but
This is the reason why we're talking about this today. We want to make sure that you really, really, really understand what you are buying and why you are buying it so that you don't become one of these statistics. If you're going to buy insurance, if you tell me that you own life insurance and I ask you, why did you buy life insurance?
you should be able to give me that answer without hesitation. You should have an exact reason for why you bought that insurance, not just because somebody told you you needed it or- It sounded like an amazing investment opportunity. It sounded like a really good deal or a great savings vehicle. You should have a real tangible reason and you should know what that reason is so that you hold onto that policy like it was intended to be.
And part of that reason is you're going to get a better deal if you hold on to these policies. A lot of, for example, low-cost term life insurance is scheduled via level premiums. And basically what that means is that every year you're paying the same amount of money. Now, the catch is that even though you're paying the same amount of money every year, it actually costs the insurance company a different amount every year. So the older you get, the more expensive insurance is.
So when you're younger, you're actually paying the most for the policy. And then as you age, as the policy gets older, actually getting a better deal each year on the policy. So make sure you're getting a good deal. Make sure to keep that level term policy. Again, if you need it all the way through. Let's talk about why we need life insurance to begin with. What are some of the things that come to mind for you? If someone says, hey, why do I need insurance, John? Yeah, it's pretty simple. It's does someone else
depend on you for the income you generate. So that's a pretty verbose way to say it. But basically, it's are you the breadwinner, right? Are you the breadwinner? Does someone in your family need the bacon that you're bringing home? So maybe it's a non-working spouse. Maybe it's your kids. Maybe it's both. But if you disappear off the earth in an untimely manner, then your family, they need your salary replaced in your absence. And that's what life insurance is for.
A few other things that kind of standard reasons why you should maybe start thinking about life insurance. If you take on a mortgage, if you buy a house and take on a mortgage, life insurance probably needs to be discussed. If you get married, again, depending on who's the breadwinner and what the income situation is, you may need life insurance. I sound like that. What's that guy? That redneck guy. Like, you know, you're a redneck when like, you know, you need insurance when the third would be having a child, right?
Bring a child into this world, cost money to raise a child and send that child to school. So insurance should be an important piece of that conversation. One of the things I kind of suggest that people do if you and your spouse are kind of wondering, should I buy life insurance is kind of do a little role play and say, okay, and this is a very hard conversation to have, but sit down with your spouse and say, okay,
if tomorrow is hit by a bus, what would happen? How would you pay for the mortgage and pay for the house and send our child to school? And maybe you have sufficient savings to cover all that stuff. And maybe your spouse makes a lot of money and a good living and maybe has a strong passive income stream or something. And
you know, you figure out, you know, we don't really need an insurance policy to cover this stuff or we don't need a very large insurance policy, but kind of play that out and then, you know, do the opposite. Well, what if the other spouse died and how would that impact your financial situation? And could we still send little Johnny to school and pay off our mortgage? And would we sell the house or keep the house? And
just kind of play it out and you'll kind of come to the conclusion like, yeah, but actually we do need some life insurance to protect against this stuff. So my wife and I, we had this same conversation. Now we don't have kids yet. So we're dual earners, no kids. Don't worry, mom. Kids are going to be in a couple of years. You'll get them. You'll get your second round of grandchildren. But when we decided... Is your mom still the only person listening to this podcast? I think she listens to it sometimes. Okay. Yeah. So we have to do a really good job to make sure she keeps listening. Yeah.
so wife and I no kids didn't have life insurance and then we bought a house now of
Of course, we're both earning incomes, but I wanted to set us up so that in the event, again, one of us disappears from the planet in an untimely manner, the other person wouldn't be stuck with a mortgage. Now, of course, we both earn money, but still, I just didn't want us to be in a situation where you have to bear the entirety of that mortgage payment. So we just got a life insurance policy, a level term policy, just small enough that
or rather just big enough to handle the mortgage. And that's it. But when we have kids, we're definitely going to get something in addition to that as well. So a few less common reasons why you might need life insurance and you might need something different than term insurance. And we'll talk a little bit about that. But
Some less common reasons. We had one client tell us this. They just want their life to be worth something. I bring that up a lot. It's kind of odd. It doesn't happen very often, but someone just wants their life to be worth something and they want an insurance policy to pay out to their brother or sister or long lost uncle. I'm not sure, but that's a personal decision. Some other more meaningful reasons, estate tax issues at death. That's a big one. Care for a disabled child.
liquidity for a closely held business, leaving a legacy that might kind of go into, I want my life to be worth something, but leaving a legacy behind you. So those are some of the kind of less common reasons that you might need life insurance, but those might come up as well. That's when you get into a little more of the complicated life insurance products, like the whole life products. But for the most part, most people, when it comes to protecting the income of the breadwinner,
All you need is a simple, low cost level term policy. Let me ask you this question, John. Do you have to have life insurance? Well, you don't have to have it. I mean, there's certainly no law. If you have people who are depending upon your income, I would highly advise it. Yeah. You don't need to buy life insurance. You don't need to pay these premiums. We're protecting against an unknown loss. And sometimes it's kind of hard to pay these premiums to an insurance company for something that may not ever occur. Right.
I think I would just say, just know the risk that you're taking and be okay with that risk. So it still makes sense to put the pen to paper and put some numbers to this thing and just really have a good understanding of the risk you're taking by not insuring yourself and your family. You could also self-insure if that somehow fit into your financial situation. That could be a little challenging if you need millions of dollars of coverage.
but self-insurance is something you can look into as well. Yeah, you brought up two great points. The first one is, gosh, I'm going to pay all this money for this policy, and if I don't die, I got nothing for it. Yeah, but you didn't die, so that's pretty good. But that just goes back to what insurance is for. We're going to use insurance to protect us from these huge financial losses, right? If you're the breadwinner in your household and your family is left without you, that's catastrophic. That's huge. So we want to use insurance to protect your family. Now, of course,
We don't want to use insurance for the cheap stuff. So if you're trying to decide between insuring your iPhone and insuring your life, please insure your life. Your family will be much greater for it. And then to your point about self-insurance, we have a young gentleman, a client we started working with recently, who's doing some cool tech stuff that I don't know anything about. And he's
he was looking at a buyout for the work that he had provided. So now this young 30-ish guy married no kids, he's looking at $2 million in cash. So he asked us, do I need life insurance? Well, we took a look at their expenses and the answer is no, he's going to self-insure. Here's a young guy, he's self-insuring for life insurance because he can afford to. Yep. Very good points.
All right, let's talk about the different types of insurance. And again, we're gonna kind of zone in on term life insurance and whole life insurance. Let's start with whole life insurance. Another name for it would be permanent life insurance. We get the most questions about this.
Gosh, I got to say, if you're in the working world, whether you're 23 years old or 55 years old, you've probably been approached by an insurance salesperson who told you whole life insurance is a good deal and a good investment. Both for you and your baby. Oh yeah, we have seen that too. We've seen children be sold this stuff through the parents. So most people have kind of come across this in their working lives. Let's just start with what is work?
whole life insurance. Whole life insurance, the way I put it, it combines investments and insurance into one policy. The insurance is permanent. So it doesn't matter if you die tomorrow or at 105 years old, as long as you're paying your premiums,
the death benefit will pay out. For most policies, there are even some policies, and it's a shame that they even call it a permanent life policy. But man, for the universal life policies, you can keep paying the premiums and the policy will still just collapse in on itself just because of the math and the numbers behind it.
So while universal life does fall into the category of permanent life insurance, even then it's not permanent, unfortunately. So there are some other variations of whole life and permanent life. I mean, it's a really complex area. It's not as simple as, hey, there's one whole life policy for everyone. Every company has their own version and different names. And it is a very, very, very confusing world. So you've got universal life, variable universal life.
whole life cash value life insurance. I mean, it gets bad. Yeah. I don't think we could even name all the different names on this podcast and make it within the one hour mark. Is there anything else you want to add to like what whole life insurance is or what it does? And we have some other things to go into, but yeah, I would just add that it's an
unholy marriage of two things that have no business being together. Just like you wouldn't buy a car with a dishwasher built into it. It doesn't make any sense. Again, for most part, there's always going to be some exceptions, but it just doesn't make any sense to buy these two things that are melded together when they just shouldn't be, when it's just better to buy them separately.
Well, I mean, whole life does serve a purpose. There's a reason why whole life insurance exists and it does sell. So who might consider using whole life insurance? I mentioned a few of them, you know, estate tax issues at death that you need to be paid no matter when you die tomorrow at 105 years old, there are things that need to be
paid care for a disabled child, liquidity for closely held business, leaving a legacy, or the last one would be I've maxed out every other thing that's out there. I'm a high income earner. I'm in a high tax bracket. What else can I be putting money into?
Like maybe, maybe this is something to consider. There are certainly applications for a whole life. But for the most part, people buy into it just because they're sold a bill of goods, which isn't necessarily the case. But that being said, we don't want to completely demonize whole life because as Taylor mentioned, there are some very important things that it can do. Estate planning is a huge, huge value add when it comes to using whole life insurance.
And then also business planning. It's a very, very useful tool. And of course, if you're being an awesome saver and you're a high income earner, then sometimes it may be the next best investment option because of the tax advantage. I put a strong maybe on there. I mean, it is appropriate for such a small, small, small percentage of people. If you've just maxed out every other tax deferred vehicle that's out there, you're still making money and wanting to save money.
I say explore it and maybe it's an option, but like we just talked about, it's a confusing and complex world. So just make sure you're working with an objective fee only financial planner who's really helping you look at this stuff and dice it apart. Cause it just, you can get caught up with something that you didn't think you bought that you
you know, now you own and you regret. And that's another thing you read about on whole life insurance. Most people regret buying these things. Once they actually learn what they own and read the fine print, most people have regret for buying these policies. Yeah, it is a rare event when it makes sense to use whole life as an investment vehicle. And again, recent example, we're working again, different younger client also in tech. He was given a benefits package by his employer. And part of it was they were going to put some money into a whole life policy for him
so much money every year. Now, this sort of benefit was designed for, again, a really high income earner, someone who is maxing out all their other accounts. Now, and while this young professional is making a good amount of money, he wasn't in the top tax bracket. So his employer putting money into a whole life policy for him didn't really make sense. Cash compensation would have been much better or putting money into his 401k or into his HSA or maybe better benefits. Just assuming that
a whole life policy is the best way to go as an investment vehicle. It just doesn't make sense until you run the numbers. So in summary, whole life insurance has its purpose, but it doesn't make sense for most of us. It combines insurance with investments and
I like to say it does a poor job at doing both of those. You're better off separating the two and getting really good maximum coverage and low cost insurance, and then putting together a really strong, low cost, smart investment portfolio and separating the two.
Another thing when you buy whole life insurance, a large portion of your premium goes to pay for all the fees involved in this thing. And a small amount goes towards the insurance and the cash value. So you might be paying $300 a month or $500 a month towards this whole life policy.
And only a fraction of that is going towards buying the things you're really trying to buy. And that's why there is this huge misconception about whole life and why so many people own it or actually not just whole life, but variable universal and all that other crazy stuff. It's just because there are huge financial incentives for these policies to be sold. And that's why they're sold. And that's why they're so common. So let's move on to term life insurance, the other type of life insurance that you can buy.
Let's just start with what is term insurance? It's just pure, simple insurance. It's you pay money to the insurance company, and if you die, then the insurance company gives even more money to your family. Pretty basic, pretty simple, pretty easy to understand. Yeah, so pick an amount of insurance that you need or that you want. Maybe it's a million dollars or $2 million or more. Pick a period of time you want to be insured for. Maybe it's 10 years, 20 years, 30 years. And then pay your monthly premiums.
If you're 45 years old and you buy a 20-year term policy...
and you die at 66, your beneficiaries don't receive a payout. The policy doesn't pay out. So you need to be careful that when you're buying term, you're buying the appropriate length and you're making sure you're covering things at the right time because you don't want something to happen to you and the term policy no longer exists. And to give a real life example of this, let's go back to myself and my wife and our mortgage. So we got the mortgage. I don't
I don't know, the balance was like $260,000. So we just got a policy for 300 because they didn't sell policies in the amount of 260. So we bought that policy and it's a 30-year policy because we have a 30-year mortgage. Now, of course, over time, the mortgage is going to go down, but the policy will still remain at 300,000. But that's what we decided made sense for us. We've got this mortgage balance. We want to wipe it out in case of an untimely demise of either of us. So 30-year mortgage.
term life policy is what we got to handle our 30 year mortgage balance. You bring up a strategy that's commonly used. And since we do work with clients who like to take a more advanced approach with this stuff, you can ladder these term policies. So some of the things you might use a term life insurance policy for, again, might be a mortgage, like John mentioned, it might be protecting your income up until retirement.
It might be sending your kids to college. All three of those things might end at different times. So you might need one term policy for 20 years and one for 10 and one for 30 to kind of protect the different aspects of your financial life. So you can get multiple term policies and ladder these things to maximize coverage and lower the cost. So for your mortgage, buy the 30-year term life policy. For paying for the kids as they grow up and everything else, a 20-year policy.
Yep. Good rule of thumb. So I think we kind of tackled like who might use term life insurance. I mean, really it's most people, anything with an end date, any financial, large financial obligation with an end date. So saving for retirement and you're holding it to save for so long, there's an end date there. Your mortgage has an end date. Your kids will eventually go into the working world and make their own living that has an end date. So any of these things with an end date, again, term life insurance is a really good solution.
why term life insurance makes sense for most people. One, it's low cost. It gives you maximum protection for the lowest cost so that you can save money in other places for other things, whether it's for retirement, a home, a child's education, any of this stuff, you're going to save money on those monthly premiums. You're going to get the most insurance coverage, and then you can use that money for other things.
Any other reasons why term life is most important? Yeah, well, it's everything you need and it's nothing you don't, right? Looking at whole life as the point of comparison. So I need life insurance coverage to pay for the mortgage in case I fall off the earth. Boom, that's all I need. I don't need some,
overpriced savings vehicle. In addition to that, I've got my own savings plans already. All right. So we've tackled whole life insurance, why you might need it, why you probably don't need it. We've tackled term life insurance, what it is, who needs it and why it makes sense. Let's talk about how and where to buy life insurance to make sure you're getting a good deal. So you've realized, okay, we need life insurance. We need term. Maybe we need one policy. Maybe we need a few.
Where do I go? Where do I begin this journey? Maybe the first place to start is how do you know how much term life insurance to buy? If it's a mortgage, that's pretty easy. You know how much to cover for your mortgage. But if you're protecting your income, our rule of thumb, anywhere between six and 10 times your income, I'd probably lean towards 10 times your annual income to be on the safe side. Yeah.
Anything to add there? No, I'd certainly say, yeah, lean towards the larger amount, especially because term life insurance can be so cheap. There's certainly no reason to skimp on it. You know, same thing for umbrella coverage. It's so cheap. Just pay a little bit more and just rest easy at night. Yep. So where to buy life insurance and get a good deal? Here's the thing.
I don't even know if Hartford sells life. I think they sell life insurance, but Hartford might give me the best price and might give you the worst price. Everybody is different when it comes to insurance. So just because your father purchased his life insurance policy through USAA and got a good deal, doesn't mean you should just go to USAA and assume that you're also going to get a good deal. So you do need to shop around to make sure you're getting the best price. Absolutely. But the good news is there is
all sorts of online aggregators that can do it for you. So it's not like you're going to be calling every single insurance company and asking them for a quote. Yeah. So you bring up a good point. I mean, shopping online makes this process pretty easy. I'll share a personal story in a second, but shopping online allows you to exactly do that, to shop for the best price that's out there.
Haven Life has received some really good press lately. I keep kind of hearing their name come up. I've never used them. I don't think you've used them before, but they seem to be building a pretty good reputation. So if I had to do it again, I might give them a look and check them out and do some due diligence there. Policy Genius,
and select quote is another one I will share. My wife and I recently bought term life insurance, and I went through select quote just to check it out and go through the process and see what it's all about. And so we can share this information with everybody. I got a great price. But
But man, like the service was terrible. There was so much friction in the process. It was not fun at all. I spent way too much time getting this policy and I just got to the end and it was almost worse than getting a mortgage. Oh, wow. I don't know if it's fair to blame select quote for all of that, but I guess you can't expect to get a really, really cheap
price and get the best service either. So you kind of have to choose sometimes. You get what you pay for. You do get what you pay for. It is just term life insurance policy. It wasn't rocket science. We got through it. We got our policies and we're done. So that's the good news. But so I can't say that there's an amazing insurance company out there. I would shop a few of these and then also call your current insurance provider. If you do use USAA for your auto and homeowners insurance, give them a call and get a quote from them as well.
And then lastly, if you work with a financial professional, I would ask them to go shop it with a company called Low Load Insurance. They're out of Florida and they work with financial planners around the country. And they actually do a pretty good job at doing both, providing really, really good service at a really good price. So they'd be worth checking out. Yeah, I'll share my experience. I use Policy Genius when we got our mortgage insurance policies, if you will.
And I didn't really have much of a benchmark for what a life insurance policy is like. So yeah, there was some stuff and we went through all the hoops and ended up with Banner Life was the cheapest for both myself and my wife. So that's what we ended up getting. The other thing I'll add is that if you have an existing insurance agent, for example, I've got a guy through Liberty Mutual and you say, hey, I want life insurance.
he very well like or she, right? They very well likely will want to sell you a whole life policy because that's when they're going to get paid the most on. So if you do go to your existing insurance rep, just make sure to keep that in mind and make sure to say, hey, I only want a level term policy. Yeah. The last thing to look out for too, when you're shopping for the stuff that I just thought of
They'll bring up this no medical exam policy. Hey, you don't need to do the medical. You don't need to do the blood. You don't need to do any of that. You automatically qualify for $500,000 worth of term life insurance.
If you are a young, healthy person, just jump through the extra hoops, do the medical exam, get your blood drawn. It's, you know, they come to your house. It's, it's really no skin off your back. It's maybe 30 minutes of your time. Answer some questions. You're going to get a better price. So yeah,
It's an easy sale for them. And I notice it's something that they try and get you to bite on. Don't bite on it. Just go through the medical exam process. They can also come to your office. They can also come to your office. Yeah. So hopefully that helps you start to kind of think about life insurance and shop around and find the best price and avoid some of these pitfalls. We hope that was helpful. There's a few other frequently asked questions around life insurance that we'll kind of wrap this up with.
The first is, should I get life insurance through my work? That's a great question. And the answer is,
You probably already know what the answer is because given what Taylor just alluded to earlier, the answer is probably going to be no. And there's a couple of reasons. The first one is that you can probably get a better deal if you get a private policy because they have what are called broader underwriting conditions. And that's just a boring technical term. Basically, what it means is that they'll take anyone. And if they take anyone, they have to charge more money because they don't know what everyone's health is like. So one, you're going to get a worse rate if you get it through your employer. But then two, you're
What happens if you leave your employer, right? If you leave your employer, then you lose your life insurance. So that's really not a good situation to be in. So for that reason, when it comes to any sort of insurance policy through your employer, life, disability, umbrella, right? Any optional policy that you can buy into, I always say pass on getting a policy through your employer. It just decreases your risk and it just means more work later down the line when you switch employers. Now you've got to go get that policy again.
Yeah, and you can check to see if the group policy has a portability feature. And some of these are portable if you do part with your employer. But they usually don't offer a whole lot of life insurance either. So you're going to end up really underinsured anyways. And you're probably going to need to go get a private policy on top of it. So you may just skip all of that and just go get a private policy. Yeah, and it's the work. It's the inconvenience thing. I mean, we're here as financial planners, technically.
to make working professionals' lives easier, right? Can you imagine what would have to be involved? Like not only leaving a job, having to find a new job, but now I've got to deal with this life insurance stuff, with this long-term disability stuff, with this umbrella stuff. Like who wants to deal with that? Just make it easier on yourself. Get a private policy from the get-go.
Keep paying the premiums and then you'll have it for as long as you need it. All right. On rare occurrences, some people have reported that they thought they had an insurance policy or they thought their mother had an insurance policy. And so they've asked, you know, how do I locate these lost policies? And one of our favorite resources, Clark Howard mentions the Life Insurance Policy Locator Service. Oh, this is so cool. I'm learning something new right now. So I'm excited. A little wordy, but just Google Life Insurance Policy Locator Service.
You just need to share some personal information on if it's you or a deceased person, you'll need to have some personal information on that. And then it takes about 90 days to hear back from the insurance companies to see if there is a policy that's out there. If you do run into issues, Clark suggests contacting your state insurance department.
And again, you can just Google that and find their information. But this does happen. People do have these policies that are out there that they're not aware of or they can't locate. So something to consider doing a search for. Neat stuff. All right, we'll wrap up here. Should I use insurance as a savings vehicle for retirement or for a child's education?
That's going to be a hard no. Yeah, sometimes we see, well, I shouldn't say sometimes. A lot of times we hear about insurance being sold as a savings vehicle. Sometimes somebody will say, yeah, I bought this whole life insurance policy. And I'll say, well, why did you buy that policy? And they'll say, well, it's a savings vehicle. I'm using it as a way to save some extra money for retirement. And I've also heard of people using it or it's being sold as a education savings tool, which is just downright scary.
So they will show you some really fancy charts and numbers that make these things look really good and make a strong case for using it as a savings vehicle or for a child's education. Just ignore it all. The numbers don't crunch. The math doesn't work. Trust us. We've done it. I think that's our short answer. Yeah. You know, it's funny. I was on a real estate investing forum and some
posted a video from an advisor, a salesperson, and it was along the lines of use this life insurance policy and borrow money from it and put money into a down payment on a property and then refi it and then pay the life insurance policy back. And basically the forum poster was saying, look at this strategy, you know, fellow real estate investors, like, what do you think? And it's like,
Yeah. I mean, if you're selling a whole life insurance, you're going to dream up any way possible to market it to people, you know, be it for real estate investing or for a kid's college education or saving for retirement. I mean, whatever it takes to close a sale, you're going to figure that out and make it up so you can sell that policy. We have said it before. Stories sell. Absolutely. I mean, people love stories. So someone builds a story around these insurance policies so they can make a quick buck. They're going to do it.
So just be careful, you know, work with an objective third party that can help you with this stuff and just make sure you really crunch the numbers and understand it. Of course. I think the last thing I'll mention, and we kind of always end on this note is life insurance is just a small piece of your financial life. We did this deep dive into life insurance today, but
there's so many other things in your financial life that factor into, should I get life insurance? How much life insurance should I get? Where should I buy it? How should we build it? Should we do a ladder? All these things go into the comprehensive financial plan and help dictate what kind of life insurance and how much life insurance you should get. So just remember that this is just a piece of your financial plan and that you need to take a much more comprehensive approach in order to get to the right answer.
And that doesn't mean you have to hire a professional. If you're a do-it-yourselfer, totally fine. But just a reminder that this is just one small piece of your financial plan. And one bonus question I'll offer since we opened the episode with 529, so then we ended with life insurance.
is, hey, I've only has $500 a month to spare and I just had a kid. Should I put this money into a 529 plan or should I put into a life insurance policy? Well, let's think about the worst case scenario for each of them. Worst case scenario, you die. Now you've got maybe 500, 1,000, 1,500 bucks into a 529 savings plan. That's really not going to do too much for your family. Now,
What if you put that money in your life insurance policy instead and you don't die? Well, that's really not going to make or break your child going to college or not. So if you've got a tight budget and you're a new parent, you're trying to decide life insurance or 529, I'd go with the life insurance every time. No, really good stuff. Thanks for sharing that. We've got a blog post. I'll link in the show notes. That'll be our tagline. We'll link it to the show notes. That'll be our send out. We'll just end with that every episode. Nice.
All right. We hope you guys found this useful. As always, shoot us your comments, feedback, questions to podcast at staywealthysandiego.com. We read and respond to every one of your emails. Thank you guys so much for your insightful comments, questions, and feedback. And we will see you in a couple of weeks. Thanks for all the great questions, guys. And remember to stay wealthy.