Search Results for: life insurance

When Do You No Longer Need Life Insurance?

November 4, 2019 By MelissaB Leave a Comment

Life insurance is the most affordable peace of mind that I can think of. For usually less than $100 a month to cover both you and your spouse, you can rest easy knowing that if something happened to you or your significant other, your family would be taken care of. When you’re deeply grieving, you won’t need to worry about making a house payment or taking care of your kids. You and your family will be protected financially. But when do you no longer need life insurance?

Life insurance is meant to be a temporary measure. You shouldn’t need it forever, which is good because it gets significantly more expensive as you age. What gets a bit tricky is predicting how much life insurance you need and when you will no longer need it.

My husband and I bought life insurance 15 years ago, when our oldest child was just four months old. We got a 20 year policy, so our oldest will be nearly 20 when our policy expires. Our youngest will be just 14 then, so we are planning to buy another policy that will overlap our current one. We’re wrestling with the idea of just getting a 15 year policy or a 20 year policy.

If you’re like us, trying to decide how long you need life insurance coverage and how much you need, here are some variables you may want to consider:

How Long Do You Want to Cover Your Children?

You’ll definitely want to have insurance coverage until your youngest child turns 18. Many people decide to carry coverage until their youngest child is 22 or 23 because college can be so expensive. If you or your spouse dies, your child may need to rely on part of the life insurance money to help pay for the remainder of college.

When Do You No Longer Need Life Insurance? — Photo by John-Mark Smith on Unsplash

How Many Years Are Left on Your Mortgage?

While this variable may not affect how many years you want coverage, it may impact how much coverage you should have. You want to make sure you have enough life insurance to pay off your mortgage, plus more to cover other expenses.

Does Your Spouse Have a Medical Issue?

If your spouse will have trouble working thanks to a medical issue, you’ll want to carefully consider both the length of time you’ll need insurance and the amount. You’ll want to keep your coverage until you’re financially secure enough that your spouse will have enough money to survive even without life insurance.

Does Your Spouse Have a Career?

If your spouse has stayed home with the kids, how easily will he or she be able to re-enter the workforce if you die? Don’t take this lightly. Entering the workforce after a long break can be very difficult.

Mary is a family friend who is a stay-at-home mom. Her husband was killed in a car accident when he was only 32. Thanks to his life insurance policy, she was able to stay home with her children until they graduated high school. Because she invested the policy wisely, she never did re-enter the workforce. Instead, she volunteered in her free time.

How Much Debt Do You Have?

Again, this is a question of how much coverage you will have. In addition to your mortgage, you want to make sure there is enough life insurance to cover your remaining debts such as car loans, student loans, and credit cards. In many states, even if your spouse dies, you may still be held liable for these debts.

Choosing how much life insurance to get and for how long requires careful consideration. These questions should help you make the right choice.

Are there any other variables you use to consider how much and how long you should have life insurance?

How Much Life Insurance Do I Need?

November 23, 2013 By Shane Ede 3 Comments

Life insurance seems like a second thought to so many people. You’ll notice that the title of this article isn’t “Do I Need Life Insurance?”. That’s because there really isn’t much question about whether you need life insurance or not. I suppose there might be a few exceptions, but pretty much everyone needs and should have life insurance. It’s just a matter of how much you need. There’s a couple of ways to figure out how much you really need.

How much life insurance can I afford?

This is probably the most popular method of choosing life insurance. And it’s completely wrong. If you ask most people how much life insurance they can afford the answer is almost always “little” or “none”. Again, wrong answer. Most of us carry car insurance because it’s something that covers us against a loss. If our car is damaged in an accident, we have the insurance to help with the cost of repairing or replacing the car. To the people who depend on us for income, we need to have life insurance in place to help with the costs of continuing on when our income is lost.

How much income do I need to replace?

This question is usually a pretty good place to start when determining how much life insurance you need. If you’re a regular budget-maker, you probably have a pretty good idea of how much income you and your family need to pay the bills and keep food in the fridge. It’s probably not your entire salary, but it might be close. Take into account any investments you have, as well as assets that might become unneeded if you die. You’re family probably won’t need that second car anymore, for instance. Also, any payments on those assets that can be disposed of can be discounted as well.

How long do I need to replace the income?

Once you know how much income you need to replace, the next question you need to ask is how long you need to replace it for. In an ideal world, you’d be able to buy enough life insurance to set your family up for life. Your spouse would be able to quit work and take care of the kids full-time. You’d be able to pay for the children’s college education. But, the world we live in is far from ideal. Most of us won’t be able to afford the premium payments on a life insurance policy that will pay out enough to do those things. In a romanticist world, your spouse would grieve for your loss for the rest of his or her life. That isn’t all that likely either. It’s far more likely that your spouse will remarry at some point.

All of that still leaves us without a real answer to the time question though, doesn’t it? You’ll have to make some assumptions in order to really answer the question. Assume that your spouse will get remarried. Assume that you’re not going to be able to pay for your kids’ college education with the pay-out. I think a good starting point is somewhere around 3-7 years. Some will say that’s too long. Others will say that it’s too short. I don’t think there is a perfect answer. And, when you’re faced with a question that has no perfect answer, you’ve got to find an answer that is as close as possible.

Calculate, then purchase.

You’ve answered how much income you need to replace, and you’ve got a pretty good idea of how long you need to replace it for. Now, you’ve just got to put the two together and come up with how much life insurance you need. Multiply the income number by the length and you’re in the ballpark. Let’s say that you determine that you need to replace about $30,000 a year in income. You’re married to a real hottie, who shouldn’t have any issues with finding suitable future spouses, but you don’t want him or her to rush into it, so you use the 5 year length. $30,000 a year X 5 years = $150,000.

You might want to add a bit extra for sudden expenses at the time of death, like funeral, casket, and burial. But, that’s a pretty good ballpark number for how much life insurance you should buy. Now comes the big step… You’ve got to purchase it. Find a good place to compare life insurance policies and costs and get all the information compiled. Then pull the trigger and purchase the policy.

That will be the hardest part of the whole thing. If anything does happen to you, your family will be thankful that you did.

Finding Low Cost Term Life Insurance

November 11, 2013 By Gary Dek 6 Comments

If you’ve been considering life insurance, you’ve most likely heard financial planners and advisors tout the benefits of term life insurance. Term life insurance is known as the cheapest and most popular type of policy available. This is because there are dozens of different kinds of term life insurance policies addressing every life situation you may be facing, not to mention the fact that it is typically the most affordable coverage for a person of any age. Determining the best type of term life insurance for you depends on multiple factors, including your age, health, present and future income, assets and liabilities.

Term Life Policies

There are many types of term life insurance policies, among them level term, increasing and decreasing term, high risk, survivorship, group, guaranteed, no exam, and mortgage life insurance. Level term offers a low, fixed premium and stable death benefit for a term of 5, 10, 20, or 30 years. With decreasing or mortgage term life insurance, the death benefit and premiums decrease each year based on the insured person’s age or the principal owed on the mortgage, allowing the cost of the policy to adjust as your income increases year after year.

Decreasing term life insurance, similar to mortgage life insurance or credit life insurance, is usually used to cover a debt like a mortgage loan and both the death benefit and premiums decrease over time as you pay down the liabilities. Banks, lenders, or financing companies may sometimes require life insurance as collateral for a business or personal loan, too.

Renewable

Some term life policies may be renewable at the end of the term. It is important to check the policy provisions to see if a medical exam or physical is required at the time of the policy renewal. Generally, renewable life insurance offers more benefits to young individuals or parents since rates of renewal policies are not as cheap as an insured person grows older. Renewable policies are a low cost alternative to permanent life insurance policies – whole and universal.

Convertible

Young people may want the benefits of whole or universal life insurance, but not be able to afford the premiums in their budgets. Convertible term life insurance allows the policyholder to change or convert the type of policy from term to whole or universal life when their budget permits.

With convertible life insurance, families and seniors still have the protection of affordable term life with the option to purchase additional coverage with options at a later date. This is a good low cost option for individuals who intend to use life insurance as part of financial planning.

No Exam

If, for any reason, you think you would be ineligible for or denied coverage by the insurance company, you can apply for a no medical exam policy. Although the premiums will be higher, this type of life insurance exempts you from the usually physical exam and blood tests required for underwriting. Instead, you will be asked to answer questions regarding your current state of health as well as offer a full medical history. The death benefit is typically limited, but older applicants or ones with pre-existing health conditions are able to get enough protection to cover final expenses. Other terms and conditions or exclusions may apply, such as no payout or claims covered for the first 2 years after issuance, so read the fine print when considering no exam life insurance.

Who Should Buy Term Life?

Since rates are largely based on the age and health of the insured person, a term life policy offers the cheapest premiums and greatest advantage to young individuals in good health because they can lock in the cheapest premiums for 20 to 30 years.

Beyond the probable fact that most Americans need life insurance, protection is most essential if you fall into the following categories:

you’re married
you have kids or dependents
you’re single but have financial dependents or loan co-signors (i.e. your parents for student loans)
you have grown children and want to leave them an inheritance, and need a policy to cover estate taxes

The bottom line is – any time you have someone financially dependent on you, you likely need to buy life insurance.