Life Insurance
We hear it all the time. A friend, coworker, family member or neighbor passed and there wasn’t a life insurance policy and now the family is not only emotionally devasted but also financially devastated. The average cost of a funeral is around $7,848 (NFDA 2023).
Can your family handle the burden when they are grieving a loss? If they cannot manage that expense or will experience financial hardship following your passing, then it is time to consider life insurance.
Let’s take a simple, honest approach to Life Insurance. CLICK here to receive more information.
- Types
In broad terms there are 2 types TERM life insurance or PERMANENT Life Insurance
Term-Life insurance Policy is in force for a set amount of time (10, 15 20 or 30 years). Coverage expires at the end of the term, and you will need to either convert your policy to a permanent life insurance plan (if available) or purchase a new term policy. Typically, term is more affordable than permanent life insurance.
Permanent-Life insurance Policy that can stay in force your entire life (never expire), as long as premiums are paid. Most Permanent Life insurance can build cash value that you can access for expenses later in life. There are 2 primary types of permanent life insurance-Whole Life or Universal Life.
Always ask yourself why you need a life insurance policy. Are you insuring your life so that when you pass away your children will be able to go to college and your spouse will be able to pay off the mortgage? These are temporary concerns and so a temporary form of life insurance – term life – is best suited to address them.
Is it to replace income for life? Fund retirement, dependent that needs lifelong care, or to pass wealth to a future generation? Permanent life insurance best fits this goal.
If it’s a temporary goal, then term insurance is probably best. Long term goal/need, then permanent is the way to go. The life insurance you choose will be there when it’s need most.
- How much do I need
There are several things to consider when deciding how much. To determine your face amount (how much your policy pays if you die) we look at your dependents and see how much they will need after you are gone. Let’s examine the following:
- Debt: All of your debts must be paid off in full. Car loans, mortgages, credit cards, etc. Example-$200,000 mortgage +$4,000 car loan=$204,000 plus a little more to cover interest and burial.
- Income: This is one of the biggest factors for life insurance; income replacement. If you are the sole provider for your dependents and you bring in $40,000 a year, your policy will need to payout $500,000 + yearly salary is a good guard against inflation. Remember to add in your debits. Example-$204,000 debit +$500,000+40,000=$744,000 (face amount)
- Future: Paying for your child’s college tuition? Good rule is about another $100,000
Add everything together for your life insurance needs DEBT+INCOME+FUTURE=Policy face amount
I can help you determine the required face value for your needs. General life insurance rule is to insure people whose death would mean a financial loss to you. If a spouse/partner contributes to the family income, then go through the same exercise to determine face value of their policy.
- How to shop/compare-
As an independent broker I can compare rates with multiple reputable insurance companies. Just need a few pieces of personal information; zip code, policy length, coverage amount age, gender, zip code, and basic medical history. This process most times, is completed over the phone with an electronic application.