According to LIMRA, 40% of Americans don’t have life insurance at all, and 30% of those who do believe they need more. Nonetheless, most Americans recognize the value of life insurance for financial protection. Have you considered the impact that the loss of an immediate family member could have on your family’s financial stability? Family life insurance.
Burial and other funeral expenses can be costly. The loss of a partner’s income or contributions to your household can be devastating. That’s why you need a comprehensive financial plan that includes life insurance as a basic underpinning.
Creating a family life insurance plan is your first step. Such a plan is an essential part of the blueprint for securing your family’s future in the wake of a premature death. Appropriate life insurance coverage for each member of your family can ensure financial stability and provide peace of mind.
Each member of your family plays an important role in your family’s future. The death of any family member—particularly if the family depends on that person—could have long-term financial consequences. You can minimize the financial impact of the loss with life insurance, but you must plan ahead.
Life insurance provides peace of mind. If you die, your spouse and children can pay for your final expenses, outstanding debts, estate taxes, and even future expenses like education.
Life insurance can also provide income stability if it replaces your income and allows your family to stay in their home and maintain their lifestyle. According to the U.S. Department of Agriculture, the average cost of raising a child to age 18 is nearly $250,000. Life insurance can help provide for your children even after you are gone.
If you are in the unique position of operating a family farm, family farm life insurance can help your family stay on its feet in the wake of a sudden death. Insurers provide family farm insurance coverage for farm operations that rely on every member of the family for economic success.
What Type of Family Life Insurance Should You Buy?
The different types of life insurance you purchase depend on the size your family, your stage of life, your financial situation, and your long-term objectives. Before deciding what is best for you, carefully consider all of your options. Your independent insurance agent can help you select the best coverage for your circumstances.
There are several different types of family life insurance to consider:
There are two options for child life insurance:
Child term life insurance. This provides only a death benefit, but can be converted into a permanent policy later on.
Child whole life or child universal life. This provides a death benefit as well as a savings account that the child can use later.
How much family life insurance do you need? The goal of life insurance is financial security for you family upon your death. With that in mind, consider the following:
Immediate expenses, including debts, medical bills, and funeral expenses
Life insurance policy details
Maintaining your family’s standard of living
Paying off your home mortgage
The amount of your salary dedicated to current expenses
The amount of your salary dedicated to future expenses
The length of time your family would need financial support after your death
Education for your children, inheritances, or charities that you wish to fund
Choose a policy face value (amount of coverage) that pays off all of your debts, provides income replacement for your family, and provides for future obligations. If you are thinking about purchasing coverage for another family member, the most important consideration is the financial burden that their death would place on your family.
Is An Individual Life Insurance Policy a Better Option Than Your Employer Plan?
Many employers offer group life insurance as an employee benefit. But there are disadvantages to relying solely on your employer-provided plan. If you are single and have no dependents or significant debts, your employer-paid term life insurance plan may be sufficient. But if you have a spouse or dependents who depend on your income, you need additional coverage.
Employer-provided coverage is often cheaper than individual policies, especially for those with health problems. But if you have a family, own a home, and need to account for other expenses, the coverage limit on a group policy will probably be insufficient. What’s more, group term life insurance ends if you leave your job.
Individual life insurance is important for people with spouses, domestic partners, and families that they want to protect. If you are the primary breadwinner, individual life insurance protects your spouse or partner from the devastating financial impact of your death. It helps pay for immediate expenses like funeral costs, your mortgage and other outstanding debts, estate taxes, and other everyday expenses. If you have children, individual life insurance allows your spouse to continue the plans you made together without undue financial hardship.
The Advantages of Buying Life Insurance for Your Spouse or Domestic Partner
You may want to purchase life insurance for your spouse or partner, even if they are not the primary breadwinner. What if you had to hire outside help—a significant expense—for childcare, transportation, housekeeping, and other contributions that your spouse makes to your family? This is a real economic value that cannot be underestimated. The amount of life insurance you purchase for a non-working spouse should account for the financial loss to your family, and should help ease your mind during difficult times.
Should You Purchase Life Insurance for Your Kids?
Many people don’t realize that there are certain benefits to buying kids life insurance. While there are many arguments against purchasing life insurance for kids, the untimely death of a child can present a financial burden to your family. A small child life insurance policy or baby life insurance policy can help you pay for funeral expenses.
In addition, purchasing a policy when a child is healthy may offer protection later in life if health problems develop and purchasing life insurance is difficult or too costly. And a child whole life insurance policy, which accumulates cash value over time, can be a great way to start building a financial nest egg for your child.
Keeping Your Family Life Insurance Plan Affordable
Many families do not have life insurance because they think it is too expensive. But most families can find affordable life insurance. Your independent insurance agent can help you get the right family life insurance with a premium that fits your budget.
The cost of family life insurance depends on the amount and type of coverage you buy and the options you choose. In general, life insurance for children and young adults is very affordable.
Term life insurance policies are generally the least expensive option. Permanent life insurance policies are more expensive because they accumulate cash value. Your premiums will be determined based on:
All things being equal, premiums will also vary by insurance company. Shop around until you find a premium that works within your budget. And be sure to investigate the financial strength of the family life insurance company you choose. Above all, you want your policy to be there when you need it.
You can take steps to save some money. Consider these tips for keeping your life insurance rates in check:
Buy young. Consider life insurance as soon as you have a child or close on your first home. Rates increase as you age and develop health problems.
Buy more coverage. You get more bang for your buck by buying a larger face amount. As with many other things, the more you buy, the less you pay “per unit”—or in the case of life insurance, per $1,000 of coverage.
Take the medical exam. If you are healthy, chances are you will be offered a better premium than a “guaranteed issue” no-medical exam policy.
Get multiple quotes. Your independent agent can work with multiple life insurance companies to find you the options that best fit your needs and budget.
Keep it simple. Stay away from riders and other options you don’t need.
Bundle coverage. If you can find appropriate life insurance with the same company as your home and auto policies, you may be able to save money.
Company life insurance
Choose term life. Whole life insurance is an excellent long-term strategy for many people, but if term life is adequate for your needs, it is also more affordable.
Choose a shorter term. It is most important to have life insurance when you have young dependents. Elect the shortest term that will protect your family while they need it.
Don’t over-insure. If your spouse works, your life insurance policy may not need to cover ongoing expenses or your mortgage. Carefully evaluate the true financial impact of your death.
Working with Your Agent to Create the Best Family Insurance Plan
When investigating and obtaining quotes for family life insurance, be sure to compare options from several companies before you choose a policy. The best family life insurance company will be the one that offers the best coverage and value for your dollar.
You might consider getting an online quote for quick results. But life insurance is an important decision for your family, and you probably need the advice of a professional who can help you understand your options and make your choice.
A Trusted Choice® independent agent who specializes in life insurance can help you learn about the various types of life insurance and answer your questions. Independent agents advocate for you, not the insurance company. And they can work with multiple companies, allowing you to look at various options and make an informed choice.
Simply request a family life insurance quote or find an agent to get started.