Why Life Insurance Important?
Are you one of those people who think you don’t need life insurance? Please think again. Life insurance has been a part of estate planning in the United States for many years. Although life insurance does not need to be a part of every person’s estate plan, it can be useful, especially for parents of young children and those who support a spouse or a disabled adult or child. Life insurance provides real security for those you care about. Life benefits can provide financial security and resources for your family or loved ones after you are gone.
Let’s look at a few of the reasons to consider life insurance:
- Payment on Debt- If you have any outstanding debt (like a mortgage) at the time of your death, it does not go away. Your estate will still be responsible to settle all accounts.
- Continuation of Income- Life insurance can provide the funds to replace your income upon your passing. Family income will certainly diminish and there’s a very good chance that your family will experience a lower standard of living.
- Unpaid Medical Expenses- It is highly likely that you will have medical expenses prior to your death; some of which may not be covered by health insurance. Adequate life insurance proceeds ensure that these final expenses are well taken care of.
- Funeral Expenses- Most people don’t plan or fund their funeral expenses; again life insurance is there to help.
The good news is that life insurance rates are low and there are many different kinds of products from which to select. One question we often get is, “How much life insurance do I need?” That really depends on your individual situation, but here is our general guideline. We think you need to consider a life insurance limit of at least 10 times your annual gross income. For example if you earn $50,000 per year, your family would need to replace some-where close to that amount. A $500,000 life policy could return $45,000 to $50,000 depending on interest rates.
Term life insurance
Term life insurance is designed to provide financial protection for a specific period of time, usually 10 or 20 years. Typically, premiums are level and guaranteed for that time. Term life insurance is generally a less costly option than permanent life insurance.
Most common Denver Term Life Insurance questions from our clients
Do I need to complete a medical exam?
Most companies offer some sort of electronic application that does not require a medical exam. However, underwriting rules may still require an examination be completed depending on your age, death benefit amount and current health status.
What are the advantages of Term Life Insurance?
Clearly the advantage is the low cost. The shorter the term the more insurance you can buy. For example, a 40-year-old male can purchase $500,000 on a 20-year term for $27.76 yet a $1,000,000 policy is only $23.22 on a 10-year term.
What are the disadvantages of Term Life Insurance?
The biggest disadvantage is the long-term cost and the inability to lock in premiums at your current age for life. Today, a 40-year-old can purchase a 20-year, $1,000,000 year term for $48.80 per month. In 20 years, at age 60, the cost for another 20-year, $1,000,000 term is $387.60 monthly and that is if there is no change in the policyholder’s health status.
