Which Type Of Life Insurance Is Best For You?

In regards to life insurance there are two basic types, one being term and the other permanent. Term insurance provides life insurance for the amount of time that the policy holder specifies. If the insured dies within the specified time, the face value of the policy will be given to the beneficiary, however if he does not die within that time span and the policy is not renewed, then nothing will be paid out. Permanent life insurance on the other hand, provides insurance protection for the policy holder’s life span, as well as a savings element. There are two common types of permanent insurance: whole life insurance and universal life insurance.

Permanent is more expensive to own than term insurance, however, you should let your family’s need be the determining factor in deciding which type of insurance is best for you, rather than the price.

You have probably heard arguments about how term policies are the better deal or marketing hype regarding cash value policies, but what it really comes down to is each person’s individual situation.

The Importance Of Life Insurance For The Stay-at-home Spouse

The loss of a stay-at-home parent is emotionally devastating for a family. Unfortunately, it can cause serious financial difficulties, as well. That’s why it’s important for stay-at-home spouses to have life insurance protection.

Some families choose to have one parent work outside the home while the other stays home to take care of children. Other families are forced into such a situation by limited childcare availability or other circumstances. In either case, most people would agree that the wage earner in any family should have life insurance protection. After all, how would the family survive without a breadwinner’s income?

What about the Spouse at Home?
If something were to happen to a stay-at-home spouse, it would be emotionally devastating for the surviving spouse and children. There are, of course, many emotional repercussions of such a tragic loss to a family. But there could also be a tremendous financial impact, as well.

During the difficult adjustment time, there could be a real need for someone to help out in caring for the children and home. Often, friends or relatives will step in to assist during the first few crucial weeks. But eventually, they will need to return to their regular lives — and the surviving spouse will need to return to work. At that point, the only recourse may be to hire professional services. And this could present a financial hardship.

The Value of the Homemaker
While everyone recognizes the vital role of the family homemaker, few people stop to think about the literal value of the services performed by the stay-at-home spouse. This includes childcare, looking after the home, preparing meals, and many other time consuming activities, like carpooling, laundry and grocery shopping.

Today, the cost of childcare for preschoolers in this country can be as high as $8,840 a year, depending on where you live.1 It’s even higher for infants and toddlers. The financial equivalent of the vital services a stay-at-home spouse provides can amount to tens of thousands of dollars a year.

That’s why it’s important for a stay-at-home spouse to have his or her own life insurance protection. It’s hard enough for a family to deal with the emotional repercussions of losing a parent/spouse. It shouldn’t be compounded by having to grapple with the financial hardships such a loss can bring, as well.

How Much Life Insurance Do You Need?
There are no hard and fast rules for determining how much life insurance is enough, because no two families have exactly the same needs or resources. As a general rule of thumb, though, the appropriate amount of insurance protection could equal up to an individual’s annual salary times the number of years before the youngest child is out of college, depending on other available income or resources. When calculating an amount for a stay-at-home spouse, the annual financial value of the services they provide should be used.

Let’s say you determine that the financial value of the services a stay-at-home spouse provides for your family equals $50,000 a year. If your youngest child will finish college in 15 years, the appropriate amount of insurance protection for the stay-at-home spouse could be as much as $750,000, depending on other available income or resources. Some other things you might consider in determining an insurance amount include funeral costs, medical expenses, probate fees, estate taxes and inflation

Don’t Overlook the Homemaker
It can be very easy to overlook the financial contributions of a stay-at-home spouse — that is, until the person is gone. If you or your spouse decide to remain at home to care for your children, don’t forget that the contribution of the stay-at-home spouse can equal tens of thousands of dollars a year. The loss of a parent is hard enough on a family; purchasing insurance coverage for a stay-at-home spouse can help ensure that it doesn’t become a financial hardship as well.

7 Reasons You Might Need More Life Insurance!

Do you have enough life insurance coverage? In many cases, there’s a major gap between the amount of life insurance coverage you need and the amount you have.

As you reach different stages in your life, your life insurance needs will change. If you fail to update your insurance policy as your life changes, you could find yourself grossly under-insured.

Reason #1: You own a home

If you’re planning on purchasing a home or refinancing your mortgage, protect your investment with life insurance. If you’re unsure about purchasing insurance, ask yourself this question: could your family make mortgage payments without you?

Reason #2: You’re in debt

Your life insurance may be enough to cover your mortgage, but what about other debts? In the event of your demise, term life insurance could be used to pay personal loans, credit card bills, student loans and any other day to day expenses.

Reason #3: Marriage

If you have a spouse, chances are you are sharing the financial responsibility. Life insurance can serve as income replacement to help your spouse pay the bills and preserve the same standard of living.

Reason #4: A new baby

Having a baby is a wonderful time for parents, but it can place an incredible strain on a family’s finances. Raising a child is very expensive. If one income is lost, could the surviving parent maintain your child’s current standard of living? Would there be adequate funds to provide your child with the education you want to provide?

Reason #5: You buy a bigger home

A bigger home usually means a larger mortgage. Make sure you increase your life insurance coverage.

Reason #6: A new job

Even if your previous employer offered life insurance benefits, you likely had a separate life insurance policy. Your new employer may have benefits, but how much? Your employer’s coverage may not be sufficient to cover your family’s financial needs. Starting a new job is a good time to evaluate your life insurance needs.

Reason #7: You become widowed or divorced

If you’re a widow or divorcee, you’ll likely need to re-examine your life insurance needs. You may have lost life insurance coverage you previously had with your spouse. Make sure you update your coverage if you’re divorced or widowed.