Life Insurance Process Doesn’t Have to be Difficult
Commonly Cited Reasons For Purchasing Life Insurance
A recent LIMRA study investigated why people purchased life insurance. The answers were pretty standard. These included:
- Prepare for unexpected life events
- Want to protect the lifestyles of survivors
- Protect my children’s futures
- Provide mortgage payments for my home
- Someone told me to
- An insurance agent contacted me
In most cases, families need something to protect them in similar ways to the above reasons. For these cases, how much insurance you need and what type to buy is not that hard to figure out.
How Much to Invest
In essence, you should make sure you cover the mortgage and receive ten times your salary. You can also quickly calculate what you need by using a calculator like this one.
What Type of Insurance Do You Need
The question now is what type. There are essentially two types of life insurance – temporary and permanent. The needs above are all temporary. That means that at some point in the future, the need for life insurance for that reason will be over. Permanent insurance is beneficial for those who want insurance benefits both now and long into the future.
What Term is Right for You
The question now is what term you want to purchase. Here, you want to cover your mortgage until it is paid and provide insurance as long as you have dependent children, as well as something for your spouse if you pass early. If money is really tight, purchasing a ten year term policy is tempting. But remember, you are wagering that you will still be healthy enough in ten years to purchase a new policy.
Benefits of Purchasing Two Policies
A better idea is to purchase two policies. Purchase a policy for your mortgage that has a term equal to your mortgage and a ten year term policy equal to 10 times your salary. That way, if you have a medical issue, you will have your mortgage covered and in ten years some of the principal will be paid off to provide something extra for your family.
Let’s look at an example for a 35 year old couple in good health with a $300,000 mortgage. He makes $60,000 a year and she makes $40,000 a year. The cost for $300,000 each of 20 year term, $600,000 of ten year term for him and $400,000 of ten year term for her would cost only $88 per month with one company. In this case, their combined income is $100,000 and they covered their family for about 1%.