Life Insurance

Looking to purchase a life insurance policy but not sure where to start? It’s an important decision and one that will affect your family greatly should something happen to you. While some people may put it off only to realize through dire circumstances how important life insurance can be, other’s may procrastinate due to not understanding how to go about getting this type of insurance. Do I need life insurance? How much should I buy? What kind of life insurance should I purchase? These are the most basic questions asked.

Are there are others in your life who will suffer financially should you no longer be there to support them? Whether you have a spouse and children, are financially responsible for your parents, or have a business partner who would suffer a financial loss should you pass away, you have people in your life who depend on your financially. A life insurance policy will provide financial security for those you leave behind.

How much life insurance should you purchase and how much will it cost? Because everyone’s financial picture is different, it’s best to have a qualified life insurance agent conduct a Financial Needs Analysis to determine just how much would be appropriate. Your personal financial information along with what your family or other beneficiaries will need to be supported will be the basis in which to determine how much life insurance you need. This includes:

  • Immediate Expenses- Funeral expenses, Estate settlement costs, Mortgage debt, Uncovered medical costs, Taxes, credit card bill, and Automobile debt.
  • Ongoing/Everyday Living Expenses- Housing, Food, Clothing, Transportation, Utilities, Health care, Mortgage/Rent, Insurance
  • Future Expenses- College tuition, Retirement, Medical care

Once you have determined these expenses and considered all of the other sources of income your loved ones can drawn upon (savings, investments, other life insurance policies, and spouses income), you can then assess how much life insurance you should purchase.

After you and your agent have decided how much you should purchase, you will need to consider what type of insurance is best for you. The length of time the coverage is needed as well as what your budget can afford are the two biggest factors in the type of life insurance you will purchase. There are two types of life insurance available: Term Insurance and Permanent Insurance.

Term Insurance lasts a specific amount of time; for example 10 or 20 years. This type of insurance is good for temporary needs like wanting to pay off a 15 year mortgage or supporting elderly parents and is the most affordable way to go. Unfortunately, once the policy is up, it will be more expensive to get another term policy as life insurance costs increase with age. With that, should you want to take out another policy once yours expires, you will have to re-qualify with another insurance physical. If your health has declined, you will probably end up paying more for your premium.

Permanent insurance, on the other hand, offers you coverage for the remainder of your life no matter how old you are when you pass away. The premium on a Permanent life insurance policy will most likely remain the same and in some cases will be stopped while your coverage still continues. Permanent insurance policies also offer the option to cash out part of your policy in the event you need to pay for an unexpected emergency, medical bills, opportunities, or college tuition for a child. Keep in mind, the initial premium for a Permanent policy is significantly higher than that of a Term policy. Your budget will play a big factor in which type of policy you choose to go with. If you choose to buy Term Insurance, ask your agent about the option of having part of your policy be Permanent.

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