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Do I Need Life Insurance?
To answer this question, examining how life insurance could help your family is essential. Life insurance is actually one of the most critical financial planning decisions you can make during your lifetime. Instead of thinking about the monetary value of life insurance, consider what a life insurance payout could mean for your family should you pass away unexpectedly. You will quickly understand that it translates to security and peace of mind.
Life insurance provides a financial umbrella that protects and provides for your loved ones during a challenging time in their lives. The life insurance death benefit can give them the money they need to pay off the mortgage on their family home, cover debts, provide for day-to-day expenses, and even pay for long-term plans such as college costs. Life insurance is about more than money; it's a simple way to provide for your family when you're not around to do so. So why do people need life insurance? To protect loved ones who would suffer financially without you.
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Who Needs Life Insurance? The Majority of Adults!
It can be easy to think that only people with young dependents should maintain an active life insurance policy. Many people could benefit from life insurance coverage. Most adults need affordable life insurance to protect their families from loss-of-life costs and provide for their future. Insurance is an important safety measure to consider for you and your family's financial future regardless of your age, marital status, or parental status. Think about how your unexpected death could put a financial strain on your family; it could be as simple as finding the funds to pay for funeral costs or to cover bigger expenses such as paying off debts. Identifying how you provide for your family now and what you'd like to provide for them in the future is the best way to see how life insurance could help your family.
Life insurance protects your family from having to find the money to cover your end-of-life expenses, such as funeral costs, and replacing your income. To help you visualize what life insurance benefits your family could experience, we've created a range of detailed life scenarios below to show how the payout of life insurance coverage could be a valuable resource - regardless of your current life circumstances.
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How Much Life Insurance Do I Need?
Getting the right amount of coverage is one of the most critical parts of securing life insurance. To find the right amount of coverage, it's essential to understand what life insurance can be used for and how it can contribute to the long-term financial protection of your family. Read on to find your answer to the question: how much term life insurance do I need?
What Can Life Insurance Be Used For?
Life insurance is a simple method of providing a cash lump sum for your family when you pass away. Many reasons lead people to opt for life insurance protection. The reasons range from protecting their young family to providing for their spouse in old age. The best way to think about your coverage needs and how life insurance can help is to think about your family's current and future financial needs. Here are some questions to ask yourself to determine how your death may impact your family financially:
- Could your loved ones afford to stay in the family home?
- Do you have debts that would negatively affect your loved ones?
- Could they afford childcare costs?
- Is your income needed for day-to-day living expenses?
- Have you already saved enough to send your children to college?
- Have you put money aside for the items you'd like to help your children pay for, such as weddings and first home down payments?
- Could your loved ones afford average funeral expenses of approximately $10,000?
- Would estate taxes cause your family financial issues?
- Would your spouse struggle financially while your estate goes through probate?
- Would your spouse need help with medical costs?
Answering these questions can help you determine how much term life insurance you need. It will also help you understand both your existing and future financial situation and where the cash payout from a life insurance policy could help your loved ones.
Life insurance can be used to protect your family from financial stress and as a financial planning tool. Think of life insurance as an umbrella to protect your family from financial strains when you pass away. In addition to the peace of mind that a life insurance policy can bring to you and your loved ones, it can also be used as an estate planning tool to mitigate tax benefit costs.
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Benefits of Having Life Insurance Coverage
The advantages
There are many benefits to holding an active policy. The advantage of coverage today gives you the peace of mind that your loved ones will be cared for financially in the event of your death. A policy allows you to plan for and meet many financial obligations that may be passed on to your family if no such plan is in place. These obligations may include payments on your home mortgage, business loan, or ensuring your children's college is paid in full. Another advantage of coverage is you can purchase the amount of protection specific to your financial needs and circumstances. Insurance is simply an affordable way to protect your family's financial future.
The simplest type of policy is known as term insurance. It is good for a period or "term" of time, typically ranging from 10, 20, or 30 years. Term insurance guarantees that your coverage amount remains level for the lifetime of the covered individuals. To determine the amount of coverage you should purchase, you can use our online insurance coverage calculator to predict your coverage needs. When you know the policy amount you need, you can also use our simple quoting process to get a term insurance quote online. You can also get life insurance plans that last for life; these are known as permanent life plans. These types of policies are guaranteed to provide a death benefit as long as the policy is kept active. ORG Private Client Group can provide quotes for both of these types of policies and help you choose the most suitable plan.
Benefits of Life Insurance Policies: Adding Riders for Additional Life Insurance Benefits
Yet another of the benefits of having life insurance is that additional coverage is available to help insure your changing life style needs. You can purchase riders to enhance your term policy. A few of the typical riders available include:
Waiver of Premium
In the event that the insured becomes disabled, this rider will pay the premiums on your policy for the duration of its term. The definition of “totally disabled” may vary from one insurer to another, making it important to be aware of the terms and conditions of this rider.
Accelerated Death Benefit
This rider is included in most policies at no additional cost. It provides that a portion of the death benefit becomes available to help with expenses, should the insured be diagnosed with a terminal disease which causes their life span to shorten considerably. Also, the definition for “terminal illness” may vary depending on the insurer, so make sure you are familiar with the terms and conditions.
Child Protection
No one wants to think about the death of a child. However, in addition to relieving the financial burden to the family, this rider also typically provides a guaranteed conversion option to a permanent policy, multiplying it up to five times the original face amount. This essentially guarantees parents the ability to purchase lifetime coverage for that child without requiring a medical exam.
What Are Some Benefits of Having Life Insurance?
Life insurance benefits for the present: providing for your family’s existing needs.
The primary advantage of carrying coverage is to help support current and ongoing expenses. When you buy an insurance policy, you have the opportunity to choose a person, known as the beneficiary, who will receive the benefit payment after the death of the insured. Policy benefits are designated to beneficiaries who can use the proceeds from a policy to pay immediate expenses such as:
- Pay off funeral costs
- Pay for medical bills
- Final estate settlement costs
- Pay Taxes
- Pay off Legal fees
- Outstanding debts
- Provide for food and clothing
- Pay utilities
Life insurance benefits for the future: leaving a legacy to help your family’s future
A policy helps secure your family's future. The proceeds of which can help your family with future financial obligation such as:
- Pay ongoing living expenses
- Pay for children's college tuition
- Establish a retirement fund for spouse
- Business sustainability
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What Type of Life Insurance Do I Need?
Another common question about life insurance is: what type of life insurance do I need? There are two main types of life insurance: term and permanent (also called whole life). The main difference between the two types of insurance is the length of coverage. Term life plans offer coverage for a fixed period, typically lasting between 10 and 30 years. The plan does not pay out a death benefit if the insured does not pass away during the policy term. Whole life plans provide life coverage; as long as the premiums are paid, the policy is guaranteed to pay out a death benefit. You may think it makes sense to choose the policy that provides the longest possible coverage, but this isn't the best fit in many cases. Term plans are much more affordable, so if the expenses you'd like to leave coverage for only last for a set period of time, you may find better value from term with its fixed length plan. Another consideration is the amount of coverage you need. Term policies are generally much cheaper, allowing you more coverage for your budget. However, if your coverage needs last for the duration of your life, for example, you're planning for your end-of-life expenses, you should consider a whole life insurance plan. Our team of licensed agents is here to discuss your coverage options to help you get the best fit.
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Comparing the Different Types of Life Insurance: Advantages and Disadvantages
The Advantages of Term Life Insurance:
- Term life insurance offers a high level of coverage for the most affordable price.
- Term life policy premiums are fixed for the life of the policy.
- Term life insurance is easy to understand and has a simple enrollment process.
- Policies can be customized with riders to add additional benefits.
The Disadvantages of Term Life Insurance:
- Deciding up front how many years you need to provide protection for your family. Premiums cost more the older you get, so if you need to extend your coverage beyond the term of your existing policy later in life, the insurance premiums will be much higher.
- Policies only last for a fixed term; if you'd like to extend your coverage, you may need to reapply and retake the medical exam.
- As term life policies can be more expensive later in life, whole life may be a better option for people over 50.
The Advantages of Whole Life Insurance:
- Policies build a cash value in addition to the death benefit. The cash value can be used to pay for premiums, borrow money to cover unexpected expenses or help pay for retirement expenses.
- Riders can be added to the policy. Riders allow coverage to be increased without the need for additional medical tests.
- The growing cash value and fixed premiums can make whole-life policies an excellent choice for predictable long-term financial planning goals.
The Disadvantages of Whole Life Insurance:
- Coverage can be expensive, which can make large coverage sums very costly.
- Premiums cost more than term life insurance premiums.
- It costs more to cover needs that will disappear, such as mortgages or family income needs for children.
- Coverage may cost more during the early years when the need for protection is often greatest.
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Whole Life Vs. Term:
There Are a Few Different Life Insurance Types To Consider:
Term Life Insurance:
- Provides fixed length coverage for terms between 10 and 30 years.
- Offers affordable plans.
- High coverage amounts available.
Whole Life Insurance:
- Provides coverage for life.
- Builds a cash value in addition to the death benefit.
- Gives a guaranteed death benefit payment.
Universal or Adjustable Life:
- A more flexible whole life plan.
- Coverage and premiums can be adjusted each year to meet you family’s needs.
- A good alternative option to term plans for the budget conscious looking for life-long coverage.
First-to-Die:
- A joint policy that provides life insurance for two people on the same policy.
- Pays out the death benefit to the surviving policyholder when one of the insured passes away.
- More affordable than buying two separate plans.
Survivor Life Insurance (Second-to-Die):
- Like first-to-die plans, this whole life option covers two people.
- Plans do not pay out until both policyholders pass away.
- Cheaper than buying two individual plans.
- Plans can be based on either whole life or universal life coverage.
Term Vs. Whole Life Insurance: Choosing the Right Type of Plan
One of the most important decisions when finding life insurance is choosing between term life and whole life insurance. Understanding your needs is an important part of determining which coverage option is right for you and your family.
When to Choose a Whole Life Plan
As whole life insurance lasts for life, people often choose whole life plans when they want to leave a guaranteed payment to their family, whether this is for funeral expenses, to leave a legacy, or anything else they wish to provide for. As whole life coverage is generally more expensive than term life insurance, it is good for people who want a lower level of coverage that lasts for life. Whole life insurance is a popular choice for people looking to protect their family from end-of-life expenses or costs associated with their death such as estate tax. So if you have high coverage needs, you may want to consider a term policy.
When to Choose a Term Life Plan
Term life insurance is the most affordable form of life insurance. Many people use term plans to cover financial obligations that will only last for a fixed time. As the longest plan only lasts for up to 35 years, people generally use term policies to provide for costs with a defined end such as mortgage payments, childcare costs, college expenses, or debt. Term life insurance is very popular with young couples and families with children. This is because young people who are just starting out in life often have high levels of financial obligations that they would like to protect their family from in the event of their death.
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Calculating Your Coverage Needs
Calculating your coverage needs is another crucial step in finding the right plan. To find out the coverage level you need to keep your family protected, you need to consider several areas:
Current lifestyle costs:
If you’re looking for a life insurance plan to help your family maintain their current lifestyle if you were to pass away unexpectedly, there are many things to consider. For example, you may want to insure the primary income earner to ensure that your family’s income would be replaced, at least for the short term. You can also consider adding coverage for large continued expenses in your life, such as mortgage payments and childcare costs. You may also want to consider insuring the primary childcare provider. Many people don’t realize just how expensive childcare is if a family member cannot care for the children. Taking out insurance coverage to help cover these expenses can limit the financial implications of losing the main caregiver.
Future expenses:
Future expenses can include anything that isn’t covered by your general day-to-day living expenses such as your children’s college education, retirement living for a spouse, end of life expenses, wedding funds, property down payments, and any other significant expenses you predict in your family’s future.
Estate planning:
Life insurance is a crucial part of estate planning for many families, whether providing a lump sum to help with estate taxes, taking advantage of tax benefits, leaving a legacy to a loved one or charity, or helping your spouse with living expenses during probate.
- Your coverage needs are unique to you, so you must work through your existing, future, and estate needs to develop a full understanding of the amount of coverage you need and how long you need it. Using the online life insurance calculator makes calculating your coverage needs quick and easy: https://lifehappens.org/life-insurance-needs-calculator/
