Determining how much life insurance you need requires an examination of your current and future financial obligations, along with the resources your family could tap.
Your future obligations are a combination of what it would cost to help your surviving family members meet immediate and ongoing needs like funeral costs, taxes, food, clothing, utilities, mortgage payments, and your future obligations like college and retirement funding. The resources that your surviving family members could draw on to meet those obligations include your spouse’s or partner’s income, savings and investments, other income producing assets, and any life insurance you might already own.
The difference between the two – your financial obligations minus the resources your family has to meet those obligations – is the approximate amount of additional life insurance you need. If this sounds confusing, you’re not alone.
This site provides the opportunity to Calculate Your Life Insurance Needs. It will walk you through the various questions you need to ask yourself and provide you with a rough estimate of how much life insurance you need to protect your family.
What type of policy should I buy, term or permanent?
There are various kinds of life insurance, but they generally fall into two categories:
Term Insurance is the most affordable type of insurance when initially purchased, is designed to meet temporary needs. It provides protection for a specific period of time (the “term”) and generally pays a benefit only if you die during that term. Calculate your insurance needs or get a quote now.
Permanent Insurance by contrast, provides lifelong protection. As long as you pay the premiums and no loans, withdrawals, or surrenders are taken, the full amount will be paid. Because it is designed to last a lifetime, permanent life insurance accumulates cash value and is priced for you to keep it over a long period of time.
For more information on permanent life insurance, please call 800.286.1830 or email [email protected].
Medical tests provide accurate, current information about an applicant’s health that enable insurers to charge premiums that reflect the level of risk an applicant represents. Because some health conditions are easily managed through proper medication, therapy or lifestyle changes, medical information makes it possible for insurers to cover applicants with certain health conditions. More serious or incurable conditions present a very significant risk that some insurers simply may not want to assume.
- Always name a contingent, or secondary, beneficiary just in case you outlive your first beneficiary
- Select a specific beneficiary rather than having the proceeds of your life insurance paid to your estate. One of the great advantages of life insurance is that it can be paid to your family immediately. If it is payable to your estate, however, it will have to go through probate with the rest of your assets.
- Be very specific in wording beneficiary designations. Saying “wife of the insured” could result in an ex-spouse getting the proceeds. Naming specific children may exclude those born later. If your child dies before you, do you want the proceeds to go to that child’s children? Changing the beneficiary designation is easy, but you have to remember to do it.
Think twice before you do, because in many situations it may not be to your advantage. Before dropping any in-force policy, consider:
- If your health status has changed over the years, you may no longer be insurable at standard rates.
- Your present policy may have a lower premium rate than is required on a new policy of the same type, if only because you’re older.
- If you replace one cash-value policy with another, the cash value of the new policy may be relatively small for several years and may never be as large as that of the original one.
- You will be subject to a new contestability period.
You should ask insurance agents for a detailed listing of cost breakdowns of both policies, including compare the premiums, cash-surrender value, and death benefits of each policy along with the features offered by both policies.
If you decide to surrender or reduce the value of the policy you now own and replace it with other insurance, be sure that:
- The agent making the proposal puts it in writing.
- You pass any required medical examination.
- Your new policy is in force before you cancel the old one.
If you miss a premium payment, you typically have up to a 31-day grace period during which you can pay the premium with no interest charged. If you own a term policy and fail to pay your premium within the grace period, your insurance company will typically terminate the policy. If you own a permanent policy and fail to pay your premium within the grace period, your insurance company, with your authorization, can draw from your policy’s cash value to keep the policy in force. In some flexible-premium policies, premiums may be reduced or skipped as long as sufficient cash values remain in the policy. However, this will result in lower cash values and a shortened coverage period.
Whether you should consider adding a rider to a policy you’re considering really depends on your specific needs, objectives and budget. Here are a few riders that you at least should take a close look at and consider.
A disability waiver of premium rider stipulates that if you become totally disabled for a specified period of time, you don’t have to pay premiums for the duration of the disability. Why might you want to consider such a provision? Disabling illnesses and injuries are much more common than you realize. If you become disabled and your income declines or disappears for a period of time, a disability waiver of premium can ensure that your life insurance policy will remain in force.
An accidental death benefit is another common rider. It will pay an additional benefit in the case of a death resulting from an accident.
Many companies offer accelerated death benefits, also known as living benefits. This type of rider allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die. Such circumstances include terminal or catastrophic illness, the need for long-term care, or confinement to a nursing home. Ask your agent for information about these and other policy riders.
