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March 2017  Volume 10, Number 3        

long term care

Ensuring a Good Life for Your Family with Life Insurance

Once you’ve decided you want to purchase life insurance to protect your family, you have more decisions to make. For example, how much life insurance coverage do you need, and how much will it cost?

The answer to these questions depends on your family’s needs and your current financial situation.

How Much Coverage

Before you start figuring out how much coverage you need to purchase, you will want to know how much income your family will need if you’re no longer in the picture. Here are a few average prices for 2017:

$7,000 – Funeral
$245,000 – Cost to raise a child
$188,900 – Home price
$50,500 – Income

Based on just these four items,the “average” family would need $500,000 in coverage. But who is truly average? To avoid being under- or over-insured, here are some other quick ways to figure out how much life insurance coverage your family will need:

  • Purchase a policy that’s seven to 10 times the amount of your annual income.
  • Use an online life insurance calculator to do some quick calculations.
  • At a minimum, buy enough insurance to cover your funeral expenses and debts.
  • Decide what amount of annual income you want to leave to your heirs and subtract other income sources that will be available to them. The resulting number is the shortfall you’ll need to replace.

Of course, to calculate a more accurate plan that’s just right for you and your family, there are many details to take into consideration.

  • Planning for Your Children – You’ll need enough coverage for each of your children through their college years. Take into account that average college tuition costs have been increasing as much as 5.2 percent annually. Are your children in daycare or private school, or do they or have special medical or care needs? You may need to provide long-term care for a child who has a disability. Don’t forget to also make provisions for your pets or livestock.
  • Planning for Your Spouse – How much will your spouse or partner need to maintain their current standard of living? Does he or she work? If yes, you can subtract their work income from the amount of coverage you need.
  • Debt – Look at your debt, which includes your mortgage, credit card debt, car loans, medical bills, legal fees, business debt and legal and tax expenses.
  • Final Expenses – The average funeral is about $7,000 but can go much higher, while cremation usually ranges from $2,000 to $4,000. Make your arrangements ahead of time so your family isn’t left making big decisions during an emotional time.
  • Charities – You may want to include your favorite charity or religious organization as a beneficiary on your policy.
  • Inflation – Keep in mind that inflation increases about three percent each year.

Types of Coverage

The price you pay will depend on how much coverage you need. Other factors include your age, sex, health issues and whether you are a smoker or overweight.

Another consideration is if your employer offers coverage. You may only need to take out just enough supplemental insurance to reach your coverage goal.

There are two basic kinds of life insurance — term (no cash value) and permanent (potential cash value). The biggest difference between the two is that term insurance doesn’t accumulate cash value. Term life insurance only pays benefits when the policy is active. Insureds buy coverage for a specified period, such as 10, 20 or 30 years. It is the most common type of insurance because it’s the less expensive of the two types.

With a permanent, or whole life, policy, you pay the same premiums throughout the life of the policy. It builds cash value throughout the life of the policy, which you can withdraw tax-free or borrow against, without affecting your credit score. For that reason, it can make a great investment vehicle for people who want to fund a future expense, such as college tuition, a child’s wedding or retirement. Within these two categories, there are other life insurance options, including:

  • Universal Life – Provides a death benefit and a cash value component.
  • Variable Life – This is a form of permanent life insurance coverage where the policyholder chooses different investment options. It offers death benefits and a cash component.
  • Variable Universal Life – The policyholder invests the policy’s cash value into different types of investments such as mutual funds.

Whatever coverage you decide to purchase, remember that your coverage needs change throughout your life. If it’s been a while since you’ve had an insurance review, please contact us for a no-obligation discussion of your situation and coverage needs.


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In this issue:

This Just In...

What to Consider When Choosing a Place to Retire

Take Charge – DIY Healthcare Cost Reduction

Ensuring a Good Life for Your Family with Life Insurance

Retired? Need a Dentist? Here Are Your Options


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