Life Insurance

Buy a policy equal to seven times your annual salary

If you’ve ever been in the market for life insurance, somebody probably recommended to you that you buy a policy equal to seven times your annual salary. This is an old adage bandied about by the insurance industry to – you guessed it – sell more insurance. Let me tell you why this is flawed. Life insurance is designed to be income replacement. It’s designed to pay the bills when you’re no longer around to bring home the bacon. So the correct amount of life insurance factors in the expenses that need covered, the amount of time those expenses need covered less any existing assets that can be used.

Take a two income couple with kids in high school and college. Their insurance needs are much more finite than say the sole bread winner with a new born. Who needs more life insurance? Here’s a hint: It’s not a function of salary. Further, it fails to take into account the possibility of Social Security survivor benefits for your spouse and/or guardian of your children. This is routinely neglected when considering how the bills get paid in your absence. But it greatly reduces the amount of coverage that’ll you need.

Don’t buy life insurance by multiplying seven or any other number by your salary. Instead, look at the expenses that need covered and the amount of time they need covered plus things like college and wedding funds. Subtract out what could be covered by your existing financial assets and Social Security survivor benefits. The total you come up with is likely much different than just blindly using a multiple of your salary.

Life Insurance

Basic Life Insurance

Life Insurance Basics

What is life insurance?
Life insurance is a contract between a policyholder and an insurance provider. In essence, it says: “If you make all of your insurance payments as agreed upon in our contract, we, the insurance company, promise to pay out a benefit to your loved ones—the beneficiaries—when you die.”

That benefit comes in the form of a cash payment, which can be paid out in one lump sum or in increments, depending on what the policyholder wants. The total amount paid out is reflective of the premiums—the regular installments of insurance payments—made by the policyholder over the course of the life of the policy.

The reason people get life insurance is so that in the event of an untimely or even long-anticipated death, the deceased person’s loved ones are looked after financially and are not suddenly forced to scramble to make ends meet, pay bills or look after themselves.

Types of life insurance are generally broken up into four categories: term life, whole life, universal life and variable universal life policies. The differences between these are centered on how long the policyholder must pay their premium, when the policy expires and under what circumstances the policy is no longer valid.

Because life events such as marriage, childbirth and major purchases impact the long-term needs of beneficiaries, it’s important to frequently reassess your life insurance policy to ensure that those you love are adequately provided for.

Do I need life insurance?
The point of life insurance is to make sure that your dependents are looked after when you pass away. Therefore, assuming you have no dependents, life insurance may not be a worthwhile use of your money. If you do have dependents, you might consider asking yourself a few questions to determine if you need life insurance and, if so, how much you ought to purchase. Possible questions include:

How much money would your dependents need for living expenses and how long would it take until they became self-sufficient?
Will your dependents inherit assets that can help them support themselves?
Are there any friends or relatives on whose care and financial support your dependents can count?
In considering factors such as these, you can establish a ballpark estimate of how well taken care of your dependents will be. You can then decide how much or how little you need to contribute to a life insurance policy and which type of policy is best for you and your dependents.

How do I buy life insurance?
Before diving head-first into a life insurance policy, have some background knowledge so you can know what you’re looking for. Understanding the difference between different kinds of life insurance and their pros and cons given your circumstances will enable you to reach the goals for you have for providing for your loved ones after you’re gone.

Once you’ve established what kind of life insurance you need and how much coverage you require, your next move is to get quotes from as many different providers that fit your coverage specifications as possible. By comparing prices, you’ll be able to pick out the most-financially attractive offer on the table or, in some cases, use one offer as leverage for getting a better offer from a different provider.

Finally, after settling on the provider that’s right for you, all that’s left is the application process. This generally entails collecting the necessary personal documents, completing an application or interview and in some—but not all—cases, getting a medical examination. Note that there are policy providers that do not require medical examinations at all, so if that facet of the process is a non-starter for you, you may want to ask providers up-front whether that is a requirement for them or not.

After completing all of the necessary paperwork, tests and interviews, you simply need to wait for approval, sign any outstanding documents and, when the time comes, pay for your policy.

Life Insurance

Universal Life Insurance, What is that?

Extra security

What do you love about your life? You may be appreciative for an accomplice who comprehends you superior to any other person. Perhaps you have a great time viewing your kids grasp their abilities. Maybe an ongoing advancement is allowing you to flex some initiative aptitudes.

On the off chance that all works out as expected, you’ll take care of the home loan, put your children through school and appreciate a long retirement. In any case, you realize the unforeseen could occur — would you like to help plan for your family’s future on the off chance that they should go on without you? Extra security may help their budgetary weight.

Your operator can show you various inclusion alternatives you can tailor to your needs and spending plan. Indeed, extra security plans might be more reasonable than you may might suspect.

Kinds of disaster protection

Life offers three kinds of disaster protection — and every ha remarkable qualities:

Term Life Insurance

Term life is a kind of disaster protection strategy where premiums stay level for a predefined timeframe — for the most part for 10, 20 or 30 years. After the finish of the level premium time frame, premiums will by and large increment. Inclusion proceeds as long as the premiums are paid. Maybe this is a choice you might need to think about when you’re on a progressively restricted spending plan and will have noteworthy costs over a shorter timeframe.

You can regularly pay a lower premium when you select a shorter term — state, 10 years rather than 20. In any case, since premiums depend on danger of death, when you are outside of the level premium time frame, a term life approach commonly gets progressively costly as you become more established.

Entire Life Insurance

Entire life is changeless protection — you’re guaranteed all through your lifetime, or until the approach develops, as long as you keep on paying your premiums per terms of the agreement. Furthermore, those premiums will remain level as long as the approach stays in power. After some time, lasting protection ordinarily collects a money esteem that can be accessed1 for an assortment of purposes while you’re as yet alive.

General Life Insurance

Like entire life, general life is perpetual protection that may likewise gather a money esteem. It offers greater adaptability, however. You can tailor an arrangement to meet changing needs with adaptable premiums2 and face sums. Widespread life additionally offers you more power over how rapidly your money esteem develops.

What’s the best inclusion for you?

With regards to extra security, there’s nothing of the sort as “one size fits all.” Everyone has various needs, objectives and money related contemplations. That is the reason inclusion arrives in an assortment of structures, with a scope of highlights you can tailor to your one of a kind circumstance:

Your family is youthful and developing, so you might be shuffling a home loan, automobile advances and childcare costs. While your costs may keep on extending after some time, you may need a reasonable extra security arrangement that encourages you plan for your family’s monetary future until the children are developed and the house is paid off.

You’re progressively settled throughout everyday life. Notwithstanding giving a demise advantage to your recipients, you may use the loan1 or halfway give up highlights of specific strategies to help bolster things like supplemental retirement pay, thinking about a relative with a handicap or getting ready for inevitable domain charges.

You’re single and have no youngsters. The passing advantage continues from your disaster protection approach may help bolster commitments, for example, the expenses of your own obligations, hospital expenses or last costs — and may likewise help leave a heritage to somebody you love or a most loved philanthropy.

Your Farmers operator can clarify your alternatives, alongside data about riders like:

Inability riders that may help pay your approach’s premiums, and may enhance your lost salary, in case you’re impaired.

A quickened passing advantage rider that lets you gather a segment of the approach’s demise advantage on the off chance that you become critically ill with a short future.

A basic disease rider that pays a single amount to you in case you’re determined to have one of a few indicated basic sicknesses, for example, malignant growth, coronary episode or stroke.