The title is not what you think. I keep trying to pick practical subjects that you can use to get rich. Life choices refers to insurance. Life Insurance!
Life insurance is always interesting. I joke about "why do I need insurance, when I die I don't get to see any of it". Actually that is true! Life insurance becomes practical when you think about the loved ones you leave behind that have been dependent on your income. So if you have a wife/husband and kiddies, life insurance makes sense.
The first thing you need to do is differentiate between insurance and investments. My advice is when you buy insurance on your life, buy just that. Term Insurance. If you want investments, set up different programs on your own and don't use the "insurance vehicle". Examples of the life insurance muddled together with investments are "whole life" and "universal life" programs.
To insure your loved ones, you want "rot gut" plain term insurance with the lowest annual premium that you can find provided it is with a A+ rated insurance company. You will get the coverage for the family in case of untimely death at a very low cost. Mission achieved!
How much term insurance? Lets work it backwards. If your work brings home $50,000 per year, you might want to continue that same amount for your family after you die. If you make the assumption the family would be paid a lump sum and they would invest it in bonds for 5% interest, you would need $1 million of term insurance. If you use a proper mix of stocks and bonds, 10% return is probably realistic and you would need $500,000 of term insurance. If your family is close to being grown, then you may figure that everyone can fend for themselves and you could rationalize lessor insurance. If you figure that your spouse would marry some asshole and use the life insurance in some extravagant way, then maybe you shouldn't consider insurance. As you can see, there probably isn't any right amount. If you have a two income family, losing one income isn't as big a deal and lessor insurance could be selected.
I don't put life insurance salespeople in the bottom dwelling, scum sucking category. They get paid on commission. The more products they can sell you, the more commission they make, They don't like plain term insurance because they make almost nothing. Dah! They play on your emotions. All the things that could happen if you die. Insist on term insurance.
At age 40, you should pay about $1.00 per year for $1,000 worth of term life insurance. So if you want $300,000 worth of insurance, it would cost about $300 per year. Pretty reasonable.
Don't even use an insurance agent. Call Selectquote or similar phone/computer agent that will compare companies for you and recommend the best deal. You never need face to face contact with an insurance agent.
You want a policy that is annually renewable and guaranteed premium for as long as possible. You don't want them raising your premium every year. Lock in the premium. Plan on needing the insurance to 65.
Make the term insurance convertible to cash value policy should you choose. You probably would not do this, but you want the right. Insist on not having to take a medical exam.
Insurance agents want to sell you "whole life" policies. To get the $300,000 "life" coverage you would probably pay $2,000 to $3,000 per year. You are buying the life insurance of a term policy and the rest of the payments you make are to pay his commissions and are to be invested to give you a 3-4% return. Really lousy investment returns. They also like to sell "universal life" which is mix and match of life insurance and different investment vehicles. Again, if you want to invest, do it some other way. Don't use insurance.
There are so many variations of insurance including health insurance, disability insurance, mortgage insurance, auto insurance, and liability insurance. They need to be considered when deciding on the right amount of life insurance to chose. For example, if you die and your $100,000 mortgage is paid off, maybe you can select a lessor amount of life insurance. All subjects for a future writing. For pure life insurance coverage, think TERM.
Love,
Dad(Just Chas.)