How To Tell If You Need More Life Insurance?

How To Tell If You Need More Life Insurance?
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The Tragedy Scenario

History shows that when a tragedy occurs like 9/11, the Oklahoma City bombing, and Hurricane Katrina, more people are buying additional life insurance. The reason this is popular is directly related to the tragedy itself. Most parents are worried they don’t have enough life insurance if something should happen to them which would leave their children footing the bills of their estate.

Beyond the tragedy scenario, people are living longer and creating more debt. If you are a surviving spouse, you and your family could be responsible for the debts left by your loved one, just one answer to the question do you need more life insurance.

Many think it’s necessary to obtain more life insurance especially with the economy down. Houses and vehicles aren’t worth what people owe on them so buying more life insurance is beginning to look more attractive to the average person.

Term of Whole Life?

Many people ponder the question, should I buy term or whole life insurance? If you decide you do need more life insurance, depending on your age and what you can afford, term and whole life insurance are very different.

Term Insurance - Term insurance provides a death benefit, or money, if the person covered dies within the term of the insurance. For example, if you have a ten year term policy and you die in the ninth year of that policy, your estate would receive the entire death benefit. Insurance statistics show that only two percent of term policies are paid out. If you live beyond the term of the policy, you’ll have to invest in a new term policy. If you’re healthy, your premium won’t be raised too high; however, if you’re not healthy or are over the age of sixty-five, the monthly premium costs might be something you can’t afford.

Whole Life - Whole life insurance provides lifetime coverage. While the premiums may be more expensive in the early years of the policy, the premiums level or max out at a chosen age. For example a $200,000 whole life policy might have premiums for ten years and then you own the policy and no more premiums are required. Whole life gives the policy holder a cash value as premiums are paid and Loans may be taken out against the cash value of the policy. For long-term life insurance solutions, this is your best bet.

What You Should Do

If you choose term insurance, ask your insurance broker to give you a guesstimate on what your monthly premium would look like after the term runs out. If you think you won’t be able to afford that, ask about a whole life policy where after a set period of years, you will have paid off the all the premiums and you are guaranteed the entire death benefit.

To help you choose a trustworthy insurance agent or broker, the Independent Insurance Agents and Brokers of America offer this advice:

  • Choose the type of insurance you want.
  • Compare more than one company for premium cost.
  • Evaluate the insurance company; ask if they are A or A- rated. Stick with only A or A- rated insurance companies.
  • Customize and work with your insurance broker to help you get the best coverage.
  • Ask about how your agent or broker will handle claims or if you will be a the mercy of the insurance company.

With the economy down, be honest and decide if you need more life insurance to cover expenses left after your death. Some people want to leave money behind so that bills and funeral expenses don’t fall to family members. Others want to leave money for a child’s education. A good insurance agent or broker can help you find a policy that meets your needs. Search for large firms or agents or brokers who are members of the Independent Insurance Agents and Brokers of America. You can visit their website here.

Photo credit by The Tulsa Insurance Guy/The Commons