Life insurance provides a way to give financial security to your dependents in the event of your premature death.  Insurance provides a replacement income to pay for the cost of living for your surviving spouse or children; it also provides an opportunity to cover funeral expenses, or the cost of living once you are no longer there to provide for them.

How Does Term Life Work?

Term life insurance pays a pre-determined death benefit if you die during the time agreed upon in your policy.  For example, if you have a 30-year term policy and die at any point during those 30 years, your insurance will pay the total amount of your benefit regardless of how much you have paid in premiums.

Because your term life insurance policy does not have a cash value, you lose the death benefit at the end of the policy term if you survive it.  This means that you may be best putting money aside in an interest-bearing investment to cover future expenses, rather than relying on your life insurance to do it.

For example, if you need to pay for your childs college fund, you may want to invest that money rather than budget for it to be included in your life insurance.  That way, your child will receive the college fund regardless of what happens to you between now and then.

Other types of investments make sense to put into your life insurance fund.  Life insurance pays out immediately, unlike inheritance, which may take several months to find its way into your beneficiarys pocket.  This is why you should always set aside some money in your life insurance to serve as replacement income, even if you have money in your estate.

How Much Insurance Coverage do You Need?

There are no specific values for life insurance, as it depends entirely upon the insureds income and his or her financial needs.  When purchasing a life insurance policy, you will need to consider several factors that will influence the total value of your policy:

• How much debt do you have to pay off? Consider car loans, home mortgages, or other collateral loans.
• How much income do you need to replace?  The younger your children, the more years worth of salary you will need to include in your insurance coverage.
• Do your dependents have purchases to fund?  If you plan to leave money for your childs college fund or to pay for your spouse to move, you will need to add that amount onto the total sum of your policy.

If you want to take the time to play with figures, you can find several life insurance policy calculators online.  These allow you to input various factors and see what the total amount would cost.  Since more coverage will lead to more expensive premiums, you should always aim to buy the least amount of coverage you need to pay for everything you want.

Not all people will have the same insurance needs, and you shouldnt allow a pushy salesperson to convince you to pay for more coverage than you need.

Similar Posts:

• A Bright Idea For Elderly Care: ‘Reverse Mortgage’ On Life Insurance
• Variable Insurance Policies
• At What Age Should You Buy Term Life Insurance?
• “Life insurance at an all-time low! Your best bet is the Internet, where you can search for and compare policies.” – J. Chatzky
• Making The Right Choice For Your Life