ADVICE

Here to Advise

Choosing Life Insurance can be overwhelming. We’re happy to answer any questions and provide advice and support as you make your decision.

How much life insurance do I need?

If you have a family or plan to have a family, buy enough life insurance so that when combined with other sources of income, it will replace the income you now generate for them. Additionally, consider having enough to offset any additional expenses they will incur to replace the services you provide. Your family may also need extra money to make changes after you die, for example, they may want to relocate or your spouse may need to go back to school.

Any “hidden income” should also be planned for. Hidden income is income that you receive through your employment but that isn’t part of your gross wages. It includes things like your employer’s subsidy or your health insurance premium, the matching contribution to your 401(k) plan, and any other perks both large and small. This is an often-overlooked insurance need but can be significant.

If you want to create an inheritance or make a charitable contribution, buy enough life insurance to achieve those goals.

Of course, you should also plan for expenses that arise at death. These include the funeral costs, taxes and administrative costs associated with winding up an estate and passing property to heirs. At a minimum, plan for $15,000.

What type of life insurance do I need?

Consider Term Life Insurance if:
You need life insurance for a specific period of time. Term life insurance enables you to match the length of the term policy to the length of the need. For example, if you have young children and want to ensure that there will be funds to pay for their college education, you might buy 20-year term life insurance. Or if you want the insurance to repay a debt that will be paid off in a specified time period, buy a term policy for that period.
You need a large amount of life insurance but have a limited budget. In general, this type of insurance pays only if you die during the term of the policy, so the rate per thousand of death benefit is lower than for permanent forms of life insurance. If you are still alive at the end of the term, coverage stops unless the policy is renewed. Unlike permanent insurance, you will not build equity in the form of cash savings.

Keep in mind that premiums are lowest when you are young and increase upon renewal as you age. Some term insurance policies can be renewed when the policy ends, but the premium will generally increase. Some policies require a medical examination at renewal to qualify for the lowest rates.

Consider Permanent Life Insurance if:
You need life insurance for as long as you live. A permanent policy pays a death benefit whether you die tomorrow or live to be 100.
You want to accumulate a savings element that will grow on a tax-deferred basis and could be a source of borrowed funds for a variety of purposes. The savings element can be used to pay premiums to keep the life insurance valid if you can’t pay them otherwise, or it can be used for any other purpose you choose. You can borrow these funds even with not so good credit.

The death benefit is collateral for the loan, and if you die before it’s repaid, the insurance company collects what is due to the company before determining what’s goes to your beneficiary.

Keep in mind that premiums for permanent policies are generally higher than for term insurance. However, the premium in a permanent policy remains the same no matter how old you are, while term can go up substantially every time you renew it.