A 2004 study showed that up to 75% of those who died between 35-years-old to 55-years-old left their significant other without adequate life insurance coverage.1 This statistic might be attributed to the fact that many don’t like to think about an early death, much less the surviving family members being forced out of the home and liquidating their assets to afford the everyday cost of living.
The possibility of early death, and the financial hardship that a premature death might impose on other family members, should never be ignored. Life insurance is a vital tool to prevent such potential circumstances from becoming a reality. The well-being and monetary needs of the surviving family members should be considered when choosing a type of life insurance.
How to Choose the Right Life Insurance Coverage
The right decision is almost always synonymous with an informed decision. Before you choose any specific policy or option, ensure you understand what each type of life insurance policy will cover and what cost. Then, and only then, you can make a well-informed decision about what coverage will best suit your specific needs and circumstances.
Term and permanent life insurance are two common types of life insurance that you might want to consider. Term life insurance is essentially a temporary form of life insurance, and it will provide coverage and pay benefits only during a designated or preset period. On the other hand, permanent life insurance will provide coverage during the individual’s entire lifetime. It can also have the benefit of accruing a cash value over time. However, premiums must be paid on time for the coverage to remain valid. There are benefits and drawbacks to each type of life insurance; it depends on the family’s specific needs.
How Much Life Insurance
You will also want to consider how much life insurance will cover the needs of your remaining family members.
- The number of family members
- Future debt
- Ability to afford the premiums
These items will all play a role in how much life insurance coverage is best.
It can be beneficial to outline what your present bills and needs are. Likewise, predict what those needs and obligations will be 5, 10,15, 20, and years down the road. Combining this information with your total household income can determine the best life insurance coverage. At the very least, you should list recurring monetary obligations – mortgage, student loan, vehicle loan, credit card debt, etc. However, including future obligations, such as a child’s college tuition, will give you the most accurate estimate of how much life insurance coverage you should purchase.
Financial solvency for young families can be ensured with a life insurance plan. However, even the best-laid strategy can become dated as life changes. So, being prepared also includes periodically reevaluating your life insurance coverage.