Do You Need Life Insurance

Do you need life insurance? The answer is yes, even if you don't have kids or an abundance of assets to protect. Life insurance is a reliable source of income for the person who's left behind to raise the children.

Ask yourself the following questions:

1. Do you have enough money in personal assets to pay for your funeral? For example, how much do you have in CDs, bonds, money market funds, one-year CDs (CDs with maturities of less than one year)? How long would it take to pay off the loans if you died? (If you don't have enough money set aside for the funeral and/or burial expenses, then you probably don't need life insurance. It's not a good idea to make major purchases unless you've got cash on hand.)

2. How much will your estate be worth at the time of death? How long will it take to pay off the debts?

3. How much money does your spouse need to live on? (For example, after paying all of the monthly bills, what's left over for food?)

4. Does your spouse have enough income from Social Security, pensions, and other sources to live comfortably? If not, life insurance can make up a shortfall. Life insurance can also replace the loss of Social Security payments that are payable to your designated beneficiary when you die before you turn 62.

5. How much do the kids need? Are your children dependent on you for food and shelter? If they are, life insurance can be used to pay off your house, or help with college expenses.

6. Are there other financial resources that can be tapped to benefit your family if you die? For example, do you have a valid survivorship agreement with your spouse? Does she have rights to any assets or income streams on behalf of the children in the event of death? If so, then life insurance may not be necessary to protect those assets.

7. How many people would be eligible to receive benefits from your life insurance policy? One of the most common mistakes made in buying life insurance is purchasing too much. It's not uncommon for consumers to purchase a $500,000 life insurance policy and immediately begin spending it.

At a certain point, the financial advisor should ask the client to provide a list of all beneficiaries who will receive any benefit from the life insurance policy. This request will often result in a long pause as the client struggles to remember all of the possible recipients. The more people who are on an insurance policy, the smaller each beneficiary's share will be in relation to their total financial need. (For example, if a married couple has three kids with college costs and medical expenses, a $500,000 term policy would be much too large. A policy for $100,000 would be much more appropriate.)

8. What are your spending habits? Are there items (for example, vacations) that you can't possibly afford to pay for without life insurance? If so, you probably need to increase the size of your policy or reduce the number of beneficiaries.

9. Have you considered setting up an inheritance trust or special needs trust to leave money to your children after death? These types of trusts offer tax breaks and other benefits that may make them more appealing than life insurance.

10. Have you talked to your financial advisor about life insurance?

Comparing products and services can be confusing. Here are some quick tips for comparing life insurance rates:

Compare quotes using the same policy form and the same state's minimum requirements. Example, if you are purchasing a $100,000 term policy in New York, then your agent should compare policies that have a term of at least five years. (Term policies have maturities of one to 30 years, with most being five or 10 years.) Compare policies for different amounts of coverage. A 30-year term policy will cost more than a 20-year policy; it will also cost more than a $100,000 policy with the same premium as well. Shop for life insurance rates on the Net. Most of the major carriers are now offering quotes on the web. If you have a high net worth or need very large amounts of coverage, you should always work with an insurance agent. Term policies (along with universal and variable) don't provide for cash value accumulation. If you want to accumulate some money through an investment vehicle, then consider purchasing a permanent policy that provides cash value before buying term insurance.

If you think that your family could benefit from life insurance, but aren't sure what type to buy or how much coverage to have, call your financial advisor today for a review of your situation. Good financial advice is priceless.

…The original article was titled…

Life Insurance: Yes or No?

One of the most common questions we receive in our office is "Should I buy Life Insurance?" The answer is simple: Yes! life insurance provides a substantial guarantee to your family in the event you die. If you don't have life insurance, then someone else will have to pay for your funeral and burial. Do you need term life insurance? Perhaps not, but if you do have term life insurance, then it's probably cheaper to keep paying for coverage than it would be to buy a larger policy. How much coverage do you need? We recommend that every family buy at least a 20-year term policy for the primary breadwinner. The amount needed depends on the size of your estate, your family's expenses, and your family's income. 20 years is the minimum we recommend for everyone; more than that would be better if possible. Term life insurance usually costs between $10 and $20 per month. If you have good health, it's possible to get term life insurance for as little as $1 per month because it's guaranteed renewable (although premiums may increase over time).

Conclusion

Life insurance is a financial safety net for your family. Even in the best of times, it's essential for your children's education and the income to sustain your family. In the event of death or disability, life insurance can be used as a financial resource to pay off debt and provide a sense of security. Good coverage will also pay estate taxes when you die (if applicable), and help protect any inheritance that you leave to your kids or heirs.