Life Insurance
When determining how much life insurance you need, and which type of policy to consider, you need to consider these things: how big your family is, your other financial obligations and goals, and your potential future earnings. And remember that even after you establish a life insurance policy, it’s a good idea to revisit your policy periodically as your needs will change over time.
Begin by answering these questions:
- What immediate expenses will your family encounter in the event of your death?
- How much would your family need to sustain themselves into the future if you passed away unexpectedly?
- Is there a mortgage or other large debt your family would need paid off?
- How much of your earnings are devoted to current expenses and how much are you saving?
- How large are your assets or other insurance policies?
- Are you a small business owner who will need to consider your business assets and interest?
Side-by-Side Comparison of Types of Life Insurance
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Term Life Insurance
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Permanent (Cash Value) Life Insurance
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| Coverage for a specific period of time, or “term”. Coverage expires at end of term but may be renewed at a higher premium.
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Designed to provide permanent coverage
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| Terms can generally be for 5, 10, 15, 20, or 25 years, but are subject to issue age restrictions. |
Issue age restrictions apply. |
| Premiums remain the same for the stipulated term for level term policies. For annual renewable policies, premiums increase each year. |
Premiums are generally level, but may be reduced or eliminated over time by using the cash value to pay the premiums, depending on the dividend paying experience of the policy. |
| Accrues no cash value. |
Cash value accrues and is larger at first, but reduces over time as the insurance cost increases with age. |
| May be renewed at end term period. However, premiums will increase based on age at time of renewal. |
Loans against cash value allowed, but will reduce the amount of coverage. |
Choosing Beneficiaries
When you purchase life insurance, you must name a primary beneficiary to receive the benefit in the event of your death. This may be a person, corporation, or other legal entity, and you may also name multiple beneficiaries and specify and divvy the benefit into any desired percentage you wish. If you name your child (who is a minor) as a one of your beneficiaries, you should also choose an adult as the child's guardian.
Information You'll Need to Set Up a Beneficiary
Typically, you'll need the following information about your designated beneficiary:
- Legal Name
- Date of Birth
- Social Security Number
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