From – iii.org
Many Underestimate Need for Life Insurance yet Overestimate the Cost, According to New Study
Choosing the right type and amount of life insurance is key to a sound financial plan for many people—but how can you determine whether you need it? Asking yourself some simple questions can help, according to the Insurance Information Institute (I.I.I.).
If you decide you do need life insurance, the good news is, it may be cheaper than you think. While many people underestimate the need for life insurance, they often overestimate its costs, according to a 2015 Insurance Barometer Study released this month by LIMRA and Life Happens. The survey revealed that 80 percent of consumers misjudge the price for term life insurance, with Millennials and Gen-Xers among the groups that overestimated the cost by the widest margins.
To assess your life insurance needs, the I.I.I. suggests asking yourself the following five questions.
- Does anyone depend on me for financial support?
Whether it’s a spouse/domestic partner, children, grandchildren, or even aging parents, you’ll want to make sure they’re left financially secure. Buy enough life insurance to replace your income while also financing the expenses your beneficiaries will incur to replace services you provide within the household (e.g., landscaping, tax preparation). Stay-at-home parents, and those caring full-time for an adult family member, should also consider purchasing life insurance to allow for hiring professionals to undertake these tasks.
Your family may have other sources of post-death income, such as Social Security survivors benefits, but this is rarely enough, particularly if you have children under 18 and want to fund their education.
- Are my retirement and other savings alone enough to support my dependents? Unless your savings and retirement benefits are substantial, the income they generate is unlikely to be enough to pay for the housing, education and other day-to-day needs of your financial dependents. And remember, they will also have to take on the cost of replacing your employer-provided benefits, such as health insurance premium payments and retirement contributions.
- Will estate and inheritance taxes significantly reduce the amount my dependents receive?
Even if you are leaving a considerable inheritance, don’t assume that will be enough. Be sure to consult with your financial advisor, or an insurance professional, on how your tax situation impacts the type and amount of life insurance you should purchase.
- What is my plan for covering final expenses? Whether or not you have dependents, you’ll want to be able to cover the expenses incurred by funeral related costs, outstanding taxes and debts, and the administrative fees associated with “winding up” an estate. These expenses can total upwards of $15,000, and can be defrayed by having the right life insurance policy in place.
- Will I be able to leave a donation to my favorite charity? A beneficiary does not necessarily have to be a loved one; it can be a much-loved cause. If you have a favorite charity, foundation, museum, etc., you can use a life insurance vehicle to leave the organization a more sizable donation than you might have otherwise.
If you answered ‘yes’ to any of these questions, it may be time to talk to your insurance professional at Hometown Insurance Agency.
Keep in mind there are two major types of life insurance—term and whole life. Term covers the policyholder for a specified period—usually from one to 30 years. Whole life, sometimes called permanent life insurance, covers the policyholder for as long as they live—even if it’s to 100.
Whether you are looking for a term policy or a whole-life policy let our Hometown agents assist you in selecting the right coverage for the right price. Our agents will review your needs with you to find out what aspects of your life are most important to protect and help you select a policy from amongst various A-rated carriers.
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