While most Americans want life insurance, only 70% of households actually have it. According to the LIFE Foundation, 30% of US households do not have a life insurance policy. This means that 11 million fewer Americans are covered by life insurance than 6 years ago. In honor of Life Insurance Awareness Month, we believe it is important to be educated on the underlying values and benefits of owning a life insurance policy.
Why Buy Life Insurance:
- Life insurance is an extremely important purchase decision since it provides peace of mind and financial security to your family in case of an unexpected death or tragedy. It ensures that your family will not suffer a financial burden when preparing for the funeral, college funds, and day to day expenses. If you have a family, a spouse, or a person that depends on you financially, life insurance is most likely needed.
How Much Coverage Do You Need:
- The amount of coverage you need depends on a variety of factors. Typically, most people choose a coverage option that is 4-5 times their annual income. However, it is recommended that you select a policy that is 10-15 times your annual income so that the coverage will be able to fully take care of the ones who depend on you financially.
How to Calculate Coverage:
The LIFE Foundation uses this calculation to help you determine the amount of coverage your may need:
(Current/Future obligations) – (Spouse’s Earnings + Savings + Investments + Life Insurance You Currently Own) = Life Insurance Needed
What Is Covered:
- A life insurance policy will cover the cost of a funeral, left over medical expenses, mortgage payments, car loans, taxes, credit card debt and a number of other payments. In addition, life insurance also covers ongoing expenses like food, housing, health care, clothing, insurance, college tuition, and retirement funds. This type of coverage will enable your family to live a similar lifestyle their are accustomed even after tragic event.
How Long Does The Coverage Last:
- There are different lengths of coverage available to purchase. Term life insurance protects you for 10, 20, or 30 years while permanent coverage lasts until death. Premiums for term life insurance tend to be less expensive than a permanent policy, however they may increase with age. Permanent policies are initially more expensive, but the costs level out over your lifetime so they tend to be less expensive over all and they do not increase. Term life insurance offers the highest death benefit at the lowest cost but permanent coverage offers lifelong protection and tax deferred savings.
Ask your insurance professional which type of coverage is right for you.