How Much Life Insurance Do You Need?
Life insurance provides valuable protection for your family in the event of your death. It ensures the ones you care about can continue to support themselves financially when you are gone. Yet, a recent study by the Life Insurance and Market Research Association reveals that more than half of Americans do not have an individual life insurance policy, and 30% have no life insurance coverage.
The Bureau of Labor Statistics states that 60% of U.S. employers offer life insurance benefits for full-time employees. While we recommend taking advantage of this employee benefit, it’s also important to note that this life insurance coverage is no longer available once you leave your employer. Therefore, we advise you to purchase individual life insurance coverage and coverage for your dependents.
WHAT IS LIFE INSURANCE?
Life insurance is a benefit paying a specific sum of money upon death. The benefit is paid to the beneficiary, or beneficiaries, named by the policyholder.
There are three basic types of life insurance:
Term life
- Provides individual coverage for a specific number of years. The most common terms are 10, 20 and 30 years. If you die within the term of the policy, your beneficiary will receive the full death benefit.
- You can often lock in a low premium if you purchase individual coverage when you are young and healthy.
- Great for covering mortgages, car payments, college tuition, childcare expenses, etc.
Whole life
- Provides a guaranteed death benefit, covers you for your entire life, and pays the face value up to the maximum age.
- Premiums are higher than you would pay for term life because policies earn cash value and provide you with a substantial death benefit.
- Great for covering funeral expenses, estate taxes, etc.
Universal life
- Enables you to build savings over time, invest your savings and earn cash value on the policy.
- These policies also offer flexible options on premium payments, policy loans, and long-term financial savings.
- Can be available to age 120
- Great for covering funeral expenses, estate taxes, charitable donations, etc.
HOW MUCH LIFE INSURANCE DO YOU NEED?
Determining how much life insurance you need depends on how you answer several questions.
First, you need to determine who, if anyone, relies on you for their financial well-being:
- Are you married? Does your spouse have their own source of income?
Do you have any children? If so, how old are they? When will they become financially independent? - Then you need to consider your financial situation:
How much debt do you have? Does that amount increase every month, or do you pay it off regularly? - How much do you spend every month?
- How much do you save every month? Does that include savings for retirement?
No matter which type of policy you purchase, you will also need to consider inflation and that your coverage needs may change over time. Therefore, we recommend you do a coverage review with a licensed agent when your circumstances change:
- You get married or divorced
- You have or adopt a child
- You have a significant change in income
- Death of a spouse or child
FOR MORE INFORMATION
If you have questions about determining how much life insurance you may need to purchase or which type of coverage is right for you, talk to one of our experienced agents. View our available products, and request a quote. We can help you determine the dollar amount that will help protect the ones you love and ensure they can continue to support themselves financially when you are gone.