How much life insurance do you need? Life insurance isn’t a pleasant thing to think about, and it may seem like an unnecessary expense. But if you have dependents who rely on you for financial support, then life insurance is really about protecting them in the case something happens to you. Your designated beneficiary(s) would collect a financial benefit upon your death.
There are a number of factors to consider in determining how much life insurance could be appropriate for you including:
- Who depends on you for their well being?
- How much do you earn yearly? One rule of thumb is to think in terms of insurance coverage representing 5 to 7 times your annual earnings, after taxes.
- That way those left behind will be supported while they get back on their feet.
- What debts do you have? If they can be paid off with life insurance proceeds, it can take a burden off your family.
- How close you are to retirement? Generally, the closer you are to retirement the less life insurance you might need.
- In addition, some other factors to consider include, if your spouse is working, would you want to provide college funding for your children and possible estate taxes.
Whether you are 25 or 55, a life insurance policy gives you the peace of mind that should the worst happen, you and your loved ones will be taken care of. Even if you already have life insurance through your employer, you may be under insured. Call Acentria today – we can work with you to ensure that there aren’t any gaps in your current coverage.
Types of Life Insurance
Term: This is the simplest and generally the cheapest form. You buy coverage for a specific period of time. The policy can usually be renewed, but premiums will increase based on age and health factors. There is no cash value.
All other types of life insurance are permanent, but there are several varieties. They all include a savings element that builds cash value, in addition to the death benefit. Once that cash value accumulates, it is accessible to the policyholder tax-free. The following are some of the common types of permanent life insurance.
Whole Life: You purchase this policy to cover your entire life, as long as you keep paying premiums. Premiums remain constant throughout the policy, and the company invests a portion of your premium that becomes the cash value. These are more expensive than term policies in the early years, but they even out because the premium dos not increase.
Universal Life: This policy is similar to whole life, but has the potential for higher earnings on the savings component. It is more flexible in terms of changing premiums and face value throughout the policy. There is usually a guaranteed return on the cash value. Disadvantages may include higher fees and the possibility of increasing premiums.
Variable Life: A variable life policy generally has fixed premiums, and you have control over the investment decisions for the cash value portion. However, this may be a riskier option because there is no guarantee for the cash value.
How much Life Insurance do you buy?
Many people decide on the amount of Life Insurance to purchase based upon an income replacement calculation, between 5 and 10 times the amount of your current income.
Think about your personal circumstances. Is your income the sole income in your household? Are there other expenses, such as college tuition, that may arise in the future? Don’t forget to include potential medical and funeral costs. Above everything, you want to be sure your family does not get stuck with bills, debts or expenses that they cannot afford.
Why purchase Life Insurance now?
Buying life insurance may seem unimaginable right now, but it could be a smart decision. Ensuring the financial future of your family is now more important than ever. At Acentria Insurance, we take the time to understand your needs to determine the amount of insurance appropriate for your unique situation. We then can recommend different life insurance product options to fit both your needs, your budget and future family planning.
Call us today to find out more about this valuable protection benefit or complete the life insurance quote request form below.
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