Many people think they’ll get to purchasing life insurance…eventually. It could be that you’re young and healthy, worry that the insurance jargon and the process are intimidating, or maybe you just have other priorities right now.
But time spent planning for the unexpected could be the best legacy you’ll leave for your family. Are you the primary or sole income earner in your household? Do you have children or other dependents? If you answered “yes” to either of those questions, you should have a life insurance policy in place to help prepare your family for the unexpected.
Life insurance needs are as unique as the policy holders. To determine your life insurance coverage, consider the following:
- How many dependents do you have, and how much financial security do you want to provide? Perhaps you have a child in private school or planning to attend college. Keep their future in mind.
- Do you have other sources of income? What about stocks, bonds, 401(k), or an inheritance?
- How much debt do you have? Mortgages, student loans, and even credit card debt add up and don’t disappear if something happens to you.
- How would you describe your lifestyle? The better your health, the lower the cost a life insurance policy will likely be.
While the answers to these questions are different for everyone, it’s important to estimate what your family would need if something happened to you. Generally speaking, a life insurance policy that is worth between five and ten times your annual salary may be a good start.
What Type of Life Insurance is Best for You and Your Family?
Life insurance policies have a broad range of benefits, depending on which type of insurance you choose. The most common types include:
Term Life Insurance - The least expensive approach, term life insurance is offered at a fixed rate during a specific period of time, often 5, 15, or 30 years. The longer the term, the more expensive the policy premiums may become. It is temporary life insurance that only provides a death benefit if the insured dies during the policy term. Unlike whole life insurance, it offers no cash value. There are two standard types of term life insurance:
- Level Term - benefits received after death stay the same throughout the time period of the policy.
- Decreasing Term - benefits received after death decrease throughout the term of the policy, often in one-year increments.
Whole Life Insurance - Also called “straight life” or “permanent life,” a whole life policy remains in place throughout your entire lifetime. It is generally the most expensive type of insurance, as part of your payment is directed to the insurance, and part goes toward your investment savings. This type of life insurance includes two primary benefits:
- Death Benefit - paid to your beneficiary at the time of your death.
- Cash Value - which can be borrowed against while you are living, or used as a savings.
Universal Life Insurance - Considered to be a sub-type of whole life insurance, universal life insurance combines aspects of term life insurance with investment savings. With universal life insurance you’re able to build savings, while having a life insurance policy. It also allows you flexibility in what you choose to do with the investment and savings part of the premium. This type of plan is the most variable, as it depends greatly on market performance and the investments in the plan.
Peace of Mind for You and Your Family
As you can tell, choosing a life insurance policy that best fits your family’s needs is a complicated task. The needs of your family, or any other beneficiaries, should be top of mind when determining your best fit for life insurance. At the end of the day, an affordable life insurance plan provides you peace of mind and can provide resources for those you leave behind.
As always, we’re here to help—if you would like to discuss your insurance needs, contact Kennebunk Savings Insurance at 1-800-794-2941 with any questions!