Life Insurance
Life insurance is a binding contract that guarantees the payment of a specific amount of money upon the death of the insured. Life insurance can help in the protection of your family’s financial security in the event of your death. The amount of insurance you need varies throughout your lifetime.
There are several types of life insurance:
- Universal Life
- Variable Universal Life
- Whole Life
- Term Life
Universal Life, Variable Universal Life and Whole Life are permanent policies while Term Life provides coverage for a specific amount of time.
Despite the fact that life insurance is the only type of coverage that we all know we will eventually need, most of us spend far less money insuring our lives than we do our automobiles, homes or other property. If we insure our lives at all, it is usually not for an amount large enough to adequately meet the needs of those we leave behind.
A survey from August of 2003 revealed that fewer than half of surviving spouses today who received life insurance benefits describe the coverage as “adequate.” When calculating the number of deaths that were considered premature, only about 60 percent even had life insurance coverage. Of that 60 percent, about two-thirds of the beneficiaries questioned received proceeds of less than three times the deceased’s income.
Let’s take a look at some of the needs to be met by a life insurance benefit. The financial impact of a death on survivors is significant and long-standing. Everyone incurs funeral costs as well as other final expenses, such as probate fees. Many also have state and federal estate taxes due. Mortgages and any other large debt should be considered. There could be extra medical bills. The costs of educating our children have become a major concern for many. Not only have expenses skyrocketed, but available assistance has gone down as well.
If something happened to you, the primary element that would need to be replaced is your earning power. Basic on-going expenses would still need to be met. Other costs-such as childcare, or maintenance and repairs-may be added, along with additional insurance for your spouse. Nothing could ever replace you, but you are performing a necessary service to your family if you provide for replacing your earning power.
In addition to providing the security needed if death occurs, most life insurance builds cash value that is available for an emergency, education funding, a financial opportunity or as a supplement to retirement income.
Simplified recommendations such as three times or five times the insured’s income are no longer valid. Certain steps may be taken, however, to help you decide how much insurance is enough to meet the needs of your family. Even though it may be difficult for you to calculate the cost of potential needs for some time in the future, your financial adviser or insurance agent can use today’s technology, providing very helpful planning tools essential to assessing your insurance needs. An adviser’s expertise will help guide you through the options available so that you can be confident in your judgment about a secure future for your family.
