Life Insurance Q & A
How much life insurance do I need?
The amount of insurance your family will need when you’re gone depends on your personal situation (income, assets, existing life insurance, investments, etc). Life insurance proceeds can help pay immediate expenses such as funeral costs, estate settlement costs and more. They can also help cover future financial obligations such as everyday living expenses, college tuition and more.
There are many guidelines out there that provide a rule of thumb amount of life insurance, but there’s no substitute for the guidance and assistance you’ll get by meeting with a qualified insurance agent.
What type of life insurance policy should I get, term or permanent?
The kind of coverage that’s right for you depends on your unique circumstances and financial goals. Generally speaking, term insurance offers the greatest amount of coverage for a lower initial premium. It provides protection for a specific period of time (the "term") and generally pays a benefit only if you die during the term. It is a good solution for people with temporary needs or a limited budget.
Permanent insurance, on the other hand, provides lifelong protection. This type of insurance is designed to accumulate cash values which you can borrow from. As long as you pay the premiums, and no loans, withdrawals or surrenders are taken, the full face amount will be paid.
A combination of term and permanent insurance might work best for you, however, you should consult with an insurance professional to determine the best solution for your situation.
Who should I designate as my beneficiary?
For many married individuals, a spouse would be the most logical beneficiary. However, if a surviving spouse would not have the ability to wisely manage a large sum of money then, a trust may be a sensible beneficiary choice. The trustees would then take charge of managing, investing, and disbursing the policy proceeds for the benefit of the surviving spouse.
Always name a “contingent” or secondary beneficiary, just in case you outlive your first beneficiary. Select a specific beneficiary, rather than having your life insurance proceeds paid to your estate. If it is payable to your estate, it will have to go through probate with the rest of your assets and may be subject to estate and inheritance taxes.