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Protect your family's lifestyle.
Guarantee funds for college or to pay debts.
Determine the amount that best suits your family's needs.
He works hard to make sure he can meet his family's needs and goals. However, preparing for your family's future means more than investing adequately to achieve your goals and time horizon. For many people, this also includes buying the right amount of life insurance to protect their family's lifestyle.

Life insurance can help reduce the financial impact on your loved ones if you die. When you plan the uncertainty of life by having a life insurance policy, you give your family the opportunity to help make up for lost income, eliminate debt, pay for college costs, maintain a business, protect family wealth o Address financial needs and goals As you adjust to a new life.

1. How does life insurance work?

The life insurance policy provides a death payment that can help protect your family's lifestyle in the absence of the ability to earn. "Many people have financial goals that they are trying to achieve through hard earned income, like paying a mortgage, paying a child to college, or supporting an aging parent. Life insurance can help meet your family's goals." Tom Ioannich says. Vice President and Actuary, Fidelity Investments Life Insurance Company.

Here's how it works: When you buy a life insurance policy, you buy a contract with the issuing insurance company. The issuing insurance company, subject to the insurance company's ability to pay claims, guarantees that upon death, it will pay beneficiaries a predetermined amount that is generally free of income tax. Beneficiaries receive payment directly from the insurance company so that the funds arrive promptly and the costs associated with the process that governs the assets go through the will. Because the guardianship process is usually public, life insurance can also provide your family with a non-financial advantage: privacy. However, depending on the size of your property, the benefits of a life insurance policy may be subject to a property tax.

2. What types of life insurance are available?

Life insurance policies fall into two broad categories: term and permanent. The policy covers a specific period of time, such as 10 or 20 years. At the end of that period, you generally stop paying insurance premiums and the coverage ends. A permanent insurance policy covers you until your death, regardless of your age, as long as the insurance premiums are current. Unlike the term, permanent insurance generally includes an investment component with an insurance policy and, as a result, carries higher premiums. Permanent insurance is commonly used for wealth transfer and property planning purposes, while temporary insurance is used to replace loss of income in the event of premature death.

Term insurance is generally more affordable and, in many cases, more convenient for most buyers. "Temporary insurance allows you to get life insurance with far less money than you would need if you were trying to buy the same amount of permanent insurance," says Iwanesh.

3. When is the right time to buy life insurance?

Many people can benefit through life insurance. "When someone else depends on their income, there is a general need for life insurance," explains Iwanesh.

You may already have life insurance coverage through your employer. However, it's generally a good idea to consider buying additional coverage independently, as policies you buy outside of your employer's plan are transferable, meaning continuous coverage even if you lose or quit your job. Also, employer coverage may not meet your financial obligations to adequately protect your family.

It is a good idea to review your life insurance need every time a major life event occurs, and also keep in mind that the more you generally buy it, the lower its cost. Think about the following events and ways life insurance could help protect your family in each scenario:

Buying a new home or major home improvements. Life insurance can cover mortgage obligations or home ownership rights in the event of death.
marriage. The wedding party should ask you to completely review your financial position, including your income, debts, and other liabilities, and add a layer of protection to both spouses.
Birth or adoption of a child. A life insurance policy can provide protection for your family's growing income needs, college education financing, and any debt you may have incurred.
New publication. A temporary insurance policy can replace any group coverage you may have from a previous employer and allow you to increase the amount of coverage based on your new salary.
 
For families with children, if one of the spouses resides in the home, it may be important to have life insurance for this spouse in addition to the basic salary pension insurance. Consider the value of parents living in the home and the services it provides. If a premature death occurs, in addition to being a devastating loss, it will put enormous financial pressure on loved ones and may affect the ability of the working husband to continue earning the same life.

Term life insurance can cover future college expenses, funeral expenses, real estate, and even business property needs. (Small businesses may consider buying life insurance policies for key people, such as the owner or primary employee, to help prevent financial problems if that person dies.)

In the meantime, you can use permanent life insurance to help manage federal and state property taxes, or as an effective way to transfer wealth to heirs.

When considering purchasing life insurance, keep in mind that you will generally have to provide "evidence of insurance." 2 This means that before an insurance company issues a policy, the company will generally ask you to undergo a basic medical exam, often scheduled at your home or workplace. In general, the better your overall health, the lower your cousin will be. "Iwanyish points out that" many factors contribute to the price you will pay for insurance, such as your age and health. Lower blood pressure and lower cholesterol, along with a healthy body weight, will lower the price. "It is generally easier, and less expensive, to buy life insurance in the 1920s, 1930s, 1940s, fifty, sixty, etc. Sometimes health problems arise later in life that make obtaining insurance difficult or expensive. "

4. How much life insurance do you need?

There are several ways to determine how much coverage you need. A simple way is to buy coverage that is 5 to 10 times your annual salary, bonuses, etc. Pursuant to this general rule, if you earn $ 50,000 annually, you will purchase a policy between $ 250,000 and $ 500,000.

There are other methods that are more accurate and take into account specific aspects of your financial situation, such as the capital that you have already accumulated, the obligations that have accumulated in you and the specific costs that you want your family to cover in the future.

"We believe that the amount of insurance you need is tied to the annual income you will need to replace in the event of premature death," says Ionic. "If you can retire, which means you no longer need to work to support yourself and your family, you may no longer need temporary insurance. However, most people in your working years are not in a position to pay your retirement expenses, and you need to Cover. "

One of the main benefits of life insurance is its ability to protect loved ones at an affordable price. Be sure to avoid buying a premium policy that you may not be able to pay in the future. "It is better to buy a smaller policy with premiums that you can comfortably afford than to buy a larger policy that should be allowed to break because you cannot afford the premiums," says Ioannich.

Finally, those who may be subject to federal and / or government property taxes may consider permanent insurance. Life insurance returns can be used to help pay real estate taxes instead of forcing the liquidation of family assets.

As your life progresses, you are likely to take on greater financial responsibilities for your loved ones. Life insurance can provide the money they need to help cover their expenses and maintain their standard of living.