Did you know that one third of all households would feel adverse financial impacts within one month if a primary wage earner died?
Life insurance isn’t a fun thing to think about, and it may seem like an unnecessary expense. But if you have people who depend on you for financial support, then life insurance is really about protecting them in case something happens to you – your designated beneficiary would collect a financial benefit upon your death. Life insurance can be confusing, so here’s a rundown of the basics.
Types of Life Insurance
Term Life Insurance is the simplest and generally the cheapest form of life insurance. Coverage is purchased for a specific period of time. It can usually be renewed, but premiums will increase based on age and health factors. This type of life insurance has no cash value.
All other types of life insurance are permanent. There are several varieties, but they include a savings element that builds cash value, in addition to the death benefit. Once that cash value accumulates, it is accessible to the policyholder tax-free. The following are some of the common types of permanent life insurance.
How Much to Buy?
LIMRA research finds that approximately 50 million households recognize they need more life insurance. But how much is enough? Many people decide based on an income replacement calculation, between 5 and 10 times the amount of their current income. However, it’s important to think about your personal circumstances:
Above everything, you want to be sure your family does not get stuck with bills, debts, or expenses that they cannot afford.
Some employers provide life insurance as part of their employee benefits package; however, you may want to consider buying additional coverage, depending on your needs.
Why Purchase Now?
Buying life insurance may seem unmanageable right now, but it could be a smart decision. Unlike other insurance coverage, life insurance is affordable. According to LIMRA, most people estimate the cost of life insurance at three times its actual cost.
The top three reasons Americans give for owning life insurance are to:
Did you know that life insurance does even more than provide financial security for your beneficiaries? It can help pay for college and support retirement security and other financial goals.
Have more questions about life insurance or want to review your current coverage? Contact a member of our personal lines team.