Thread by @roncaruthers

1. How to buy life insurance.

First off, I write a LOT about using properly structured life insurance as a tool to grow money tax free, withdraw it tax free, AND protect yourself against the downside of the market.

But today, I'm going to talk about how to buy term insurance.

2. First off, if you missed my original thread about cash value insurance vs. a 401k, here it is:

https://twitter.com/roncaruthers/status/1181965345579421697

3. I'm going to address 3 things:

-Why buy it (seems obvious, but there are some nuances)

-How much to get;

-How to get the best price (this will shock you)

Let's dig in!

4. First off, life insurance is a 'love' product, as a friend of mine once said....you buy it because you love someone

(or something, like your business, and you need it to get a loan)

So, here is what I recommend:

Buy all that they'll sell you. Yes, there is a limit.

5. You can NOT leave someone rich from life insurance anymore than you can't have good enough homeowners or car insurance that you get 2 houses or 2 cars out of the deal if something happens to the one.

6. What a lot of people don't realize is that in addition to medical underwriting, there is financial underwriting as well, which is usually tied to your income or net worth.

So, if you're 25, usually, the most they'll 'let' you have is about 40 times your salary.

Why?

7. Because they figure you'll work to about 65, and that's about what you'll earn.

So, if you made $50,000 at age 25, the MOST you could get for most companies is about $2,000,000.

(40 x $50,000)

8. In other words, you literally cannot be worth more dead than alive.

Because people who are worth a lot more dead than alive tend to turn up dead at an alarming rate.

9. So, if you have someone that depends on your income, ESPECIALLY if you have kids, most likely you want them to have the same standard of living they had when you were alive.

To do that, you're going to need to replace all the money you haven't made yet.

10. Hence why I say buy all that they'll sell you.

With that out of the way, let's talk about how to get the best price.

You shop for it, just like you would anything else.

Remember, this is different than buying cash value insurance where LOTS of other factors come into play.

11. With term insurance the 'product' (a check if you die) is the same.

So, as long as the company is solid and going to stay in business, you're good.

So first, you find someone you trust that represents a BUNCH of companies, because everybody underwrites things differently.

12. Then, you apply for that company, and go through whatever exams they make you take.

Now....here is the ninja part...once you're approved, you take your medial exams to your 'Greg' and have him shop all over again to get you the best price.

What is a 'Greg'?

13. Greg is my dude that has access to all of the 60 or so companies I work with that will go inside their software and tell me who is REALLY going to give my client (or me) the best price.

So, you shop once up front, but then again after.

14. The last time I purchase term insurance, he saved me about $100 a month.

When I had a 68 year old client that had prostate cancer recently, Greg had me get my guy's #'s from the doctor, and had him pre-approved before we ever filled out the paperwork....

15. And he had his coverage in force in about 2 weeks.

So, when you're buying term insurance where the ONLY thing you care about is price and the death benefit, remember to shop it both before AND AFTER you fill out the application.

16. And, buy as much as you can afford (or need if it's a business deal, say to secure a loan.)

Finally, if you're buying it to replace your income, then I would generally set the term (how long the rates are locked in for) for as long as you're going to be working.

17. Back to my 25 year old....I'm not sure too many companies have 40 year term, but a bunch of them have 30 year term, so if he or she selected that period, that's how long the rate would be locked in for.

And THAT is your lesson on how to buy term life insurance.