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How much life insurance do you need?
Life insurance is there to help your loved ones with financial needs if you aren’t there anymore. Consider your mortgage and other debts, how much income would need to be replaced, money to cover a funeral, and college for the kids. Add those up, and you'll have a good idea of how much insurance you’ll need.
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Term or permanent?
There are two main categories of life insurance:
Term life insurance is the simplest and least expensive option. It covers you for a set period of time. You might consider term life insurance when you have a family that depends on your financial support or while you have a mortgage. For example, you may want a term life policy that lasts until your children are out of school.
Permanent life insurance provides coverage for your entire life as long as you keep up the payments. Because of the length of coverage, it costs more than term life insurance. These policies may have features that offer a cash value that can be used to invest or pay some of the premiums later in life. Permanent life policies are complicated so it’s best to talk to a financial planner when deciding if one is right for you. If you do buy a permanent life policy, make sure to check with your agent each year to see how the policy is doing and if you need to adjust your payments.
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How much will it cost?
Insurance companies consider things like your age, health, job, and tobacco and alcohol use when setting prices. It will cost more to purchase life insurance as you get older and if you have health problems. Some companies may require a medical exam before selling you life insurance.
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Who will benefit?
You can leave money to a spouse, children, other family member, or friend. This is known as the policy’s beneficiary. You can also name an institution as your beneficiary, such as a business or charity. And you can choose more than one beneficiary and specify how the money will be divided.
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