Teachers supply children with essential information, introduce new ideas and topics, and try to expand their interests. When teachers educate children to read and introduce them to a treasure trove of literature, they help your child expand their perspective and enrich their ideas. The importance of teachers in society is often overlooked by the average individual. Without good teachers, children would not prosper in the way they should. Society relies on teachers to protect their children every day, but are teachers protecting themselves financially every day? If you’re a teacher and you don’t have life insurance in place as a backbone of your financial plan, it should be on the top of your to do list.
How Much Life Insurance Do You Need?
Life insurance for teachers should be a subject that all teachers have reviewed. How much life insurance coverage should you get? Perhaps you need a life insurance policy to replace your income in the event of your untimely death. Hypothetically, if you earn an annual income of $50,000, you could need as much as $1,250,000 in life insurance if you believe in the “4% rule”. The 4% rule is an idea that you should be able to invest an amount of money (called the principle) and take out 4% annually without dipping into the principle. The idea states that one would be able to do by investing the principle in a diversified portfolio and only taking 4% annually.
Different strategies can be used to determine the amount of coverage to get with a common method being buying 10-12 times of your current annual income. While you might buy your life insurance depending on what you can afford you could also consider what you need to determine the amount of coverage to get. However, there are more specific ways the death benefit can be calculate for life insurance for teachers.
Human Life Value
This is also known as the multiple of income method which is usually based on your net value after-tax income all through your work life. This is an easy method since it uses a random multiple of the income to determine the amount of life insurance. Because a random multiple is used, this method might be safe but it might not give you an accurate estimation of the life insurance amount you will need.
Unlike the human life value which uses a multiple of income, this method uses the current financial ability and the cost of future goals. One advantage of the needs-based analysis is that it gives a more precise figure. You should consult with a life insurance professional as there are various factors that could alter the amount of life insurance that you should get on yourself that may not stand out to you.
Using Life Insurance to Protect Your Pension
Life insurance for teachers may be more important than private company workers because of the pensoin they will receive one day. Most teachers will have a pension once they retire which could be another factor that they will have to consider when deciding on how much coverage they should have.
As a teacher, you will have a choose a pension option when you retire. The “max pension option” will provide you with the highest income for which you are eligible. All the other options – called “Survivorship options” – will provide an income less than the max option. The “max pension option” will provide you with income until you pass away. Once you pass away, your pension income goes away.
Survivorship Options provide a safety net for your spouse – if you pass away and you have a survivorship option – your spouse will receive a pension income for as long as she lives. Having a life insurance policy will allow you to take the max pension option without sacrificing coverage for your loved ones in the worst-case scenario. Therefore, you might want to consider having a term policy that is convertible to a permanent policy once you decide on the amount of coverage you may want.
Do you have children?
Whether or not you have children will play a role in how much life insurance coverage you should consider having. New parents need more life insurance than parents of older children because they have more expenses ahead of them. Estimated costs for raising a child over 18 years are over $284,000.
On top of childcare, health insurance, and a mortgage, your coverage should account for day-to-day child-raising expenses like clothes, camp or extracurriculars, diapers, food, toys, and college tuition. If you’re planning for a baby, it’s best to buy coverage before you get pregnant. Once you’re already pregnant, it’s best to either apply during your first trimester or wait until a few months after you’ve delivered. Otherwise, any pregnancy-related weight gain or complications can impact your rates.
Once you have decided the amount of life insurance for teachers you are comfortable with based on your unique financial situation you will have to decide on where to get the coverage from.
Should You get Life Insurance Through Work?
Is getting life insurance through your workplace good? It is good to have it, but you need to consider its adequacy. For the most part, workplace life insurance is equivalent to 2-3 times your salary. This may sound like adequate coverage, but if your family is included or you have a mortgage or a pension to protect, the coverage is simply not enough.
Life Insurance for Teachers – Why You Should get Life Insurance Outside of Work
Group life insurance is broad and there’s no opportunity to customize your policy. Employers typically offer coverage amounts that are a multiple, usually 2-3 times, of your salary. On average, families that only have life insurance coverage through their group policy at work only have about $225,000 of death benefit. That’s a reasonable amount, but anyone with a family to support, debt to pay off, or big future expenses will likely need a larger death benefit.
You also can’t add riders to a policy you get through work. Riders are additional terms and conditions that enhance your coverage for specific situations. There are riders that allow you to accelerate the death benefit in the event of illness, get an additional benefit for the death of a spouse or child, or add more coverage for accidental death or dismemberment.
Most group life insurance policies aren’t portable when you leave your job. This means that if you leave your school district or your job as a teacher you will not be able to take that specific life insurance policy with you when you go. While you may have the chance to convert it to an individual policy, you’ll have to pay the premiums your employer previously covered.
Does Group Life Insurance Look at Your Health?
Since a group life policy is guaranteed coverage — there’s no evaluation of your health, age, or overall risk to determine your premium — it will likely be more expensive than an individual policy if you’re low risk. On the other hand, you might be able to exploit this flaw if life insurance companies were to deem you a high risk life insurance client.
Most group life insurance policies are term, meaning they last for a set number of years and then expire. Financial experts often recommend term life insurance for most people because it’s affordable and acts as a safety net while you build up your savings, but it’s not the only option. If you want to build cash value and/or leave money behind for your spouse, kids, or grandkids, a permanent life policy could be a better fit for your personal position. You may want to consult with a financial planner to see if it’s a good option for you.
How do to get Life Insurance?
Once you decide on how much life insurance and what type of life insurance you would like to get by yourself, how do you acquire it? First, you are going to have to pick which company you would like to apply to. Each life insurance company has their own sweet spots in terms of what type and amount of life insurance coverage they are best at. You may want to consult with a life insurance professional so they can point you in the right direction on which life insurance company you should apply to based on what you are looking for.
Once you land on a company, you are going to have to apply to that company based on what amount and type of life insurance you would like. This consists of an application and a medical underwriting process. The life insurance company will look at your information and the medical that they may or may not make you take (some companies offer accelerated underwriting) and determine what medical rating they are willing to issue to you. Most life insurance companies will be somewhat consistent across the board, but some companies are more lenient than other on certain conditions.
The healthier the life insurance company deems you, the cheaper the life insurance premiums will be. The rate classes range from super preferred to preferred to standard plus to standard, to rated on tables A through G. Every company has slightly different terminology on how they express the ratings. Once they issue you the rating, the rating will be a determinant on the cost of the life insurance, and you will have the option to accept and take out the policy or decline and not take that specific offer.
How do you Start?
Obtaining life insurance for teachers may seem like a daunting task but if you break it down step by step it is manageable. First, you should take an inventory of your financial life to see what you are going to need to protect now and in the future. Once you have an idea of how much coverage you would like I would suggest consulting with a life insurance professional to help you through the process. When selecting the professional you would like to work with you should ask if they are independent agents. If a life insurance professional is an independent agent that means that they will have access to multiple life insurance companies to shop your rate around to get you the best rate and will not be pushing one company in particular because of the compensation they receive, instead of looking for the best deal for you.
If you are thinking about purchasing life insurance, want more information or want to apply for a life policy, contact NextGen Life Insurance. Get your free quote today or call us at 646-216-4199 to get started .