Life Insurance Buying Decisions

Life Insurance needs vary by person, and will change depending on what stage of life a person is in. Life insurance is a vital part of your family’s financial stability and well-being. Here are some questions you should answer when analyzing your life insurance needs:

1. Do you actually need life insurance?
If you have no debt, and no one depends on you financially, and your estate has enough cash to pay death taxes and expenses, you may not need life insurance. However, most people do need some life insurance.

2. How much life insurance do you need?
There are two important considerations:

• What financial resources will be available to survivors after your death? Consider three categories of resources: (1) Social security and other retirement-related survivor benefits; (2) group life insurance; and (3) other assets and resources. It is also important to know when these resources will become available—for example, social security survivor benefits are payable immediately to a surviving spouse with dependent children, but only after age 60 if there are no children.
• What financial needs will your survivors have after your death. For simplicity, consider three categories of requirements: (1) final expenses; (2) debts; and (3) income needs. Then subtract the financial resources of your survivors from their financial needs to determine how large a policy to buy. Many people are underinsured, often because they skip these steps or take a shortcut (such as simply buying a multiple of annual income). For more help in determining the right amount of life insurance, a good life insurance agent can guide you.

3. What type of life insurance best meets your needs
Three main types of life insurance are available: term life, whole life and universal life. A Term Life policy has lower premiums, and may be appropriate if insurance is needed for a specific period of time (20 Years? 30 Years?). A better choice for someone who wants the insurance for a longer period of time, and as a way to accumulate savings, may want a Whole Life or Universal Life policy.

4. What “riders” to the policy should be included
Two types of riders to consider are: 1.) Waiver of premium and 2.) Guaranteed insurability. Waiver of premium will pay the life insurance if you are disabled. Guaranteed insurability allows you to increase the death benefit without providing additional evidence that you are in good health.

5. Tell your beneficiaries about your life insurance policy
Once the policy is issued, inform your beneficiaries the company that issued it, where to find the paper copy of the policy and any specifics about what you want them to do with the death benefit. And store your policy somewhere it can be easily accessed by your beneficiaries.