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Blog Articles: 5 Things to Know About Your Life Insurance


When it comes to strengthening your overall financial wellness, many people could benefit from flexing their muscles with a greater understanding of life insurance.

Think about going to a gym and walking into a room with a variety of machines and equipment. What if you don't know what they do or how to properly use them? This is similar to how many Americans feel about the various forms of life insurance. People know they need it, but they are often unsure of the type of coverage they should get and when to get it.

September is Life Insurance Awareness Month, which is a great time to get the accumulation, protection and distribution aspects in shape. To help you get started, here are five important questions you should ask yourself.

Why do I need life insurance? Many people simply overlook the important role that life insurance plays in financial planning. It's not typically as popular of a topic as portfolio construction or retirement income planning. The reality, however, is that as we transition into adulthood and take on growing responsibilities and family obligations, life insurance soon becomes fundamental to having a comprehensive plan.

Thinking about the unexpected isn't always easy, but taking the necessary precautions has it benefits. Just like a healthy body, protecting your assets in your financial plan with life insurance can help mitigate future risk. For example, if you have outstanding debts or financial obligations, the right policy may help ensure that those burdens do not fall on your family members after you're gone.

Beyond the most common use, which is providing a death benefit, life insurance may also come in handy for more sophisticated planning. If you have a child with special needs or a life-altering condition, death benefits may provide the ability to secure their financial future without adversely impacting your other children. Or, it could provide the means to cover any taxes that might be left on your estate.

At the end of the day, you want to know that your loved ones will be taken care of, and life insurance can help to deliver that sense of comfort.

What are the popular types of life insurance? When making a decision about life insurance, there are two basic types of policies that are important to understand. Term policies cover you for a specific length of time to insure against an unexpected loss. There are also permanent policies — including whole, indexed universal and variable universal — which provide a death benefit but do not end after a specific number of years. This kind of insurance is designed to protect you for your entire life. As each type of coverage has its own unique features and benefits, working with a financial advisor can help you to choose the best fit for your financial goals.

Your employer may also offer group life insurance as part of your benefits package. This can be an attractive perk, but the level and type of protection may not meet all of your needs by itself. Some larger employers may offer a certain level of coverage at no cost, whereas some may also offer an extended portion to be purchased voluntarily. Employer-provided life insurance can be a great addition to your overall plan, but you should review your needs carefully to determine if you need further forms of protection.

How do I build life insurance into my comprehensive financial plan? The right life insurance policy can contribute in a number of ways to building a comprehensive financial plan. These aspects might include securing retirement income, ensuring your legacy goals and providing levels of comfort and confidence for you and your family.

Unfortunately, many Americans are putting other financial priorities ahead of this purchase. According to a recent survey by Voya, nearly half (45 percent) of Americans were willing to give up their financial security if it meant keeping their smartphones, cars or vacations.

How much coverage do I need? Industry research from LIMRA shows that over half (52 percent) of consumers don't buy more insurance because they don't know how much to buy, and nearly as many (47 percent) worry about making the wrong decision. Some coverage — even if a modest, flat amount such as $50,000 or $100,000 — is certainly better than nothing. But it's best to conduct an analysis of your own personal needs. A financial advisor can help quantify how much and what type of insurance makes the most sense for you and can work to obtain your coverage.

There's no one-size-fits-all model when it comes to these decisions. Income, assets, debts, dependents, financial goals and risk tolerance are all factors to consider when determining how much coverage is appropriate for you. There are also many online calculators to use as a starting point to help figure out your basic needs.

When should I purchase life insurance? Everyone's plan for life insurance is unique and based on their individual needs and life stage; you should consider purchasing a policy as soon as you develop a need. Milestone events – such as buying your first home, getting married and having children – are often important times to consider a purchase. As there is generally no cash accumulation for a term policy, the cost is relatively low. During the years when your financial needs are greatest, this might be a cost-effective way to ensure your family is financially covered.

You might think about a permanent policy at a point in life when you have more complicated financial planning needs. Because the cash value inside your policy can grow income tax-free and can be accessed tax-free by using a combination of loans and withdrawals, these plans have the ability to provide more options and greater financial flexibility during your lifetime. These types of policies can be best suited for things like funding a trust, paying estate taxes, passing on a business or donating to a charitable cause.

Either way, the earlier you start planning the better. The cost of life insurance can increase each year as age, health and finances are all factors that can affect your total premium.

Life insurance can be a great tool for you and your family, and it can play an active role in your holistic financial planning approach. This month, remember to take a few minutes to exercise your curiosity and think about protecting your financial future. Life Insurance Awareness Month may only last 30 days, but a healthy policy can deliver benefits for years — even generations — to come.

Original Source:

2018-02-06 14:29:54