Life Insurance

Questions

How Much Life Insurance is Enough?

One reason for choosing a life insurance policy is to figure how much your dependents will need after you’re gone. In order to choose the face value (the amount your policy pays if you die) of your life insurance you should consider the following:

  • How much debt you have: All of your debts must be paid off in full, including car loans, mortgages, credit cards, etc. If you have a $200,000 mortgage and a $4,000 car loan, you need at least $204,000 in your policy to cover you debts (and possibly a little more to take care of the interest as well).
 
  • Income Replacement: One of the biggest factors for life insurance is for income replacement, which will be a major determinant of the size of your policy. If you are the only provider for your dependents and you bring in $40,000 a year, you will need a policy payout that is large enough to replace your income plus a little extra to guard against inflation. Just to replace your income, you will need a $500,000 policy. This is not a set rule, but adding your yearly income back into the policy (500,000 + 40,000 = 540,000 in this case) is a fairly good guard against inflation. Remember, you have to add this $540,000 to whatever your total debts add up to.
 
  • Future Obligations: If you want to pay for your child’s college tuition you will have to add this to the amount of coverage you want, which would be about another $100,000

Adding everything together, you will probably want a policy for $840,000 ($540,000 to replace yearly income + $200,000 for the mortgage expense + $100,000 university expense).

Once you determine the required face value of your insurance company, you can start shopping around for the right policy (and a good deal).

Obviously there are other people in your life who are important to you and you may wonder if you should insure them. As a rule, you should only insure people whose death would mean a financial loss to you. If you have a spouse or partner that also is a contributor to the family income, then it would make sense to go through the same exercise to determine the face value of the policy.

Why it’s Worth Considering Final Expense Insurance?

Anyone who has lost a member of their family knows how difficult loss can be. The emotions are overwhelming.

However, one really doesn’t have time to grieve because you need to deal with the financial implications. Plus, the cost of a funeral adds up quickly. The last thing you or your family needs is to worry about the funeral expenses. That is why planning ahead is critical.

Burial insurance or final expense insurance is a basic life insurance policy that covers people until they reach the age 100. It is an easy insurance to obtain. Depending on the policy, burial insurance or final expense insurance gives your family the ability to cover the expenses of a funeral and potentially other outstanding expenses.

Besides the protection that a final expense insurance policy offers, its never changing premiums and permanent coverage makes it a wise investment for your future.

Expensive funerals

Funeral costs can add up, especially if you consider the:

  • Funeral service
  • Cemetery plot and headstone
  • Cost of casket
  • Funeral procession
  • Miscellaneous costs

These costs can quickly add up, making burial insurance a smart and pre-emptive decision. Don’t make your loved ones worry about expenses. Call today to learn about burial insurance or final expense insurance policy so your family doesn’t have to worry about it tomorrow.

Which Makes Sense for You: Permanent or Term Life Insurance?

In a very broad sense, there are two types of life insurance:

  • permanent life insurance and
  • term life insurance.

Permanent life insurance is a type of life insurance that can stay in force for your entire life, as long as you pay your premiums in full. Permanent life insurance usually, but not always, builds cash value for you that you can use for expenses later in life.

On the other hand, term life insurance is only in force for a specified amount of time: usually 10, 15, 20 or 30 years. At the end of the term, your coverage expires and you will need to either convert your policy to a permanent life insurance plan (if available) or purchase a new policy for a new term. The advantage of term life insurance is that it’s somewhat less expensive than permanent life insurance.

Which Is Right For You?

The answer depends on what you’re trying to accomplish by having 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.

However, if you are concerned about providing income to a widow or widower for life, funding retirement, or passing wealth to a future generation then you will find that permanent life insurance is better suited to address these goals.

Always ask yourself why you need your life insurance policy. If it’s for a temporary goal, then term insurance is probably best. If it’s to address a long-term need or concern, then it’s time to start looking at permanent policies.