In the event of the early death of a spouse it is important to consider the financial needs of surviving family members. It is unthinkable that the surviving family members would be forced to liquidate personal assets or lose their home simply to make ends meet. It is essential in the present economy to protect our families from this type of financial hardship.
Recently a study found that as much as 75% of people who died between the ages of 30 and 55 left their spouses without adequate life insurance coverage.1
Choosing the Right Coverage
It is important to be well informed when choosing what coverage is best for you and your family. Two types to consider are permanent life insurance and term life insurance. Whether you decide on one type or the other will be based on your specific needs.
Permanent life insurance provides lifetime coverage so long as the premiums are paid when due and also includes the added benefit of accumulating cash value in the policy.
Term life insurance or "temporary" life insurance provides coverage for a specific or designated period of time.
To fully understand your insurance needs you must outline not only the present financial needs of the family but also those projected in the future. Financial obligations such as mortgage payments and other recurring debt payments are key to calculating the right amount of coverage needed. Future factors may include college tuition for your children and retirement plans for your spouse. These factors should be combined with your present source of income and that of your spouse, if any, to determine the right amount to purchase.2
Be Prepared
Since we are unable to predict the future and often life can change in an instant it is essential to plan ahead. It is important to follow these unexpected changes with the evaluation of your life insurance coverage. Such steps will ensure that your family remains financially secure.
1) National Association of Insurance and Financial Advisors (NAIFA) 2004
2) The cost and availability of life insurance depend on such factors as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely there may be surrender charges and income tax implications
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