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Security for Life: Life Insurance for Parents
Posted On: Mar 09, 2017
(This is a guest blog written by Jackie Waters)
Whatever type of insurance you’re considering, the main reason for buying it is to protect yourself and your family from financial loss that you could not cover on your own. In general, that means purchasing home insurance, car insurance, life insurance and health insurance. Here are some tips for keeping your family securely insured.
When you have children, life insurance is important because it provides income for your family should something happen to you. If you have children at home, then it’s important for both spouses to have life insurance, even if one of you does not work outside the home. This is because if something were to happen to that spouse, you would have to pay someone else to take care of the children. The next thing to consider is what type of life insurance you need. There are two main types of life insurance.
Term life insurance:
This provides a death benefit if you are deceased within a certain number of years, but will not provide any income if you live beyond that period.
Permanent life insurance:
Also known as a whole life or universal life policy, this type can be a combination of term life insurance and an investment account that pays out when you die, unless you liquidate it for the cash value before your death, but doesn't necessarily stop after a few years, possibly covering you for an entire lifetime. This type of insurance is initially more expensive than term life insurance.
How Much Life Insurance do You Need?
If you have children, bear in mind their financial demands. Don’t be tempted to buy more — or less — life insurance than you need. Calculate your current debt-to-income ratio, how much money you and your spouse will need to support your children through college, and the amount you’ll need to carry yourselves through retirement. If you need help with these financial projections, consult any agent or a “fee only” financial advisor. You can find one here. It can be extremely helpful to your family to pay off the mortgage and/or provide income for those payments if you aren't around. Bear in mind that life insurance can also allow you to give to charity/ies upon your death.
Where Should you Buy Life Insurance?
There are certain factors to consider when you’re shopping around for life insurance:
- Choose a company that will still be around when it’s time to file a claim.
- Check their financial strength rating and only choose one with an “A” rating.
- Contact an agent who represents a particular insurance company (Prudential, New York Life, NW Mutual Life, State Farm, etc.) or
- Contact a broker who can represent a number of companies, such as an investment representative or property-casualty agent, or
- Shop for the lowest rates using an online broker such as FindMyInsurance.com.
- Bear in mind that quotes from internet brokers are estimates.
- If you have an association to organizations such as USAA or TIAA-CREF, you may be able to get a low-cost life insurance policy through them.
Understanding Living Benefits
Make sure your insurance policy has a “living benefits” component. This allows you access to the insurance money while you are still alive under special circumstances, such as if you become seriously ill and need money to pay for living expenses or medical costs. Living benefits may also include the following riders:
- Accelerated death benefits: will allow you access to your payout if you are diagnosed with a terminal illness.
- Chronic illness: will allow you access to your payout if you are chronically ill and are unable to manage daily living without assistance (for example, if you need help with tasks like eating and bathing).
When you Don’t Need Life Insurance
There are certain circumstances in which you may no longer need a life insurance policy. These include:
- If you and your spouse have enough sources of income and assets to care for yourselves independently.
- If your children are self-sufficient adults.
- If your estate is liquid enough to pay estate taxes or too small to owe them.
If you haven’t already, you should buy a health insurance policy now. Don’t let your loved ones suffer financially when you pass away. A life insurance payout will help them cover funeral costs, living expenses and college expenses.
Author: Jackie Waters
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