If you died today, how would your death hurt your family financially?
Most people avoid talking or thinking about their death, but failing to plan for the future can be a disservice to the family members you’ll leave behind. If your family depends on your income, how will they get by without it? If you stay at home to care for your children, will your spouse be able to afford daycare if you aren’t there?
Life insurance is one way to ensure that your family will have the financial resources they need to meet their needs if something happens to you. As a recipient of life insurance proceeds, I can assure you the money from insurance policies can be an incredible blessing for your loved ones.
Most insurance agents sell some form of life insurance, and policies range from a few thousand dollars to hundreds of thousands and beyond. You can choose a policy that works for your situation and your budget. Veterans can choose coverage through the Veterans Group Life Insurance plan. Your employer may even offer a small life insurance policy as an employment benefit.
There are two main types of life insurance: term life and whole life. My husband and I have term life policies because we think they are the wisest investment, but you should talk to your insurance agent — or maybe several — before deciding.
Term Life: You pay a monthly fee for coverage over a certain term (often 5-30 years), and if you die within that term and while you’re current on your payments, the insurance company pays benefits to beneficiaries you name. Once the term expires, you have to obtain new coverage with a new term. Typically, term policies are significantly cheaper than whole life policies.
Whole Life: You pay a monthly fee for coverage, just like a term policy. Your coverage is guaranteed for your entire life, and these policies typically also have a cash value. You can cash in your policy at certain times, but the fees for cash value policies can be very high so these are not a good investment vehicle.
How much coverage should you get? That depends on your family’s needs. Most financial advisors encourage parents of young children to get coverage at least 10 times their annual salary. For stay-at-home parents, this could be 10 times the amount it would cost to put the children into daycare or pay for other expenses caused by the parent’s death.
Here are a few resources if you’d like more information about life insurance: