September is Life Insurance Awareness Month
A 2010 study revealed that individual ownership of life insurance was at a 50-year low. All you need to do is take a look at the economic downturn of the past few years, and you will realize just how important it is to have a life insurance policy.
Life insurance is generally one of the most essential forms of insurance a person should have. While some choose investment of funds rather than taking out a life insurance policy, it is discouraged. Not only is this risky, but there is no way of knowing if you will suffer an untimely death.
If you do not have an individual life insurance policy for yourself or your family members, then stop and consider the financial devastation that could occur in the event of a loss.
Funeral expenses alone can be staggering, and the average person does not have funds set aside to absorb such costs. Don’t risk the financial security of your family by leaving them without life insurance; struggling to maintain a home and faced with mounting debt that they are not equipped to handle.
How much life insurance do you need?
The general rule is five to ten times your annual salary. Factors to consider in determining how much insurance you need would include the number of dependents you have, your total indebtedness, and the lifestyle you are accustomed to.
What are the different types of life insurance?
Whole Life. This is the most common type of life insurance policy and one that guarantees that a policyholder is protected for their entire life. While the premiums tend to be higher they generally remain the same throughout the life of the policy. Whole life policies offer both a death benefit and a cash value which accrues as premiums are paid in. Cash reserves are used as investments, however a policyholder has no control over where the funds are invested. Some plans will allow the policyholder to withdraw the investment portion.
Term Life. This is the most common type of life insurance. Many policyholders will choose this type of policy whenever they are younger than 40 years of age and have no family or serious illnesses to consider. This type of policy only offers protection for a specified amount of time as the maximum term is 30 years. For this reason, the premiums are typically lower. However, as the policyholder gets older the premiums increase as the likelihood or risk of death increases. This policy offers a death benefit but no cash value.
Variable Life. These have the most expensive premiums due to cash reserves that allow you to invest in whatever choices are offered by the insurance company. On the upside, a policyholder can enjoy the potential growth that comes with investment funds, however the downside is that these policies are dependent on the stock market. Therefore you can can lose value just as quickly as you gain. A riskier type of insurance; the death benefit can fluctuate depending on the policyholder’s investment account.
Universal Life. This is a more flexible policy, featuring aspects of both term and whole life policies. This type of policy is permanent and offers a cash benefit upon the death of the policyholder. While the amount of the death benefit can be adjusted as the policyholder deems appropriate, the policy is guaranteed not to fall below a certain level. The premiums can fluctuate as you use part of your accumulated earnings to pay a portion of the premium cost. Premiums are less expensive than whole life, yet higher than term life policies.
Call Lott & Gaylor today to discuss what type of policy is best for you. Let us help you determine how much life insurance is needed to insulate your family against financial shock.