Do you have enough in­sur­ance — and the right type?

The Covington News - - Front page -

Septem­ber has been des­ig­nated as Life In­sur­ance Aware­ness Month — so you may want to take this op­por­tu­nity to learn more about your life in­sur­ance needs and de­ter­mine if you’re ad­e­quately cov­ered.

In fact, help­ing peo­ple un­der­stand the ne­ces­sity of be­ing prop­erly in­sured and the need to seek pro­fes­sional ad­vice re­gard­ing those needs is the ul­ti­mate goal of Life In­sur­ance Aware­ness Month, which is co­or­di­nated by the non­profit Life and Health Foun­da­tion for Ed­u­ca­tion (LIFE). Some 68 mil­lion adult Amer­i­cans have no life in­sur­ance at all, ac­cord­ing to LIMRA In­ter­na­tional, a world­wide as­so­ci­a­tion of in­sur­ance and fi­nan­cial ser­vices com­pa­nies. And many peo­ple with in­sur­ance have far less cov­er­age than they need.

If you have loved ones de­pend­ing on your in­come, it’s im­por­tant to dis­cuss how life in­sur­ance may pro­tect them. But choos­ing the right amount of cov­er­age, and the right type, is not quite that sim­ple. So let’s take a look at two key ques­tions you need to ask: How much in­sur­ance do I need? And what type of in­sur­ance is right for me?

There are many fac­tors to con­sider when de­ter­min­ing how much in­sur­ance you need. That’s why you’ll need to look at some key vari­ables in your life, such as: How many chil­dren do you have? Do you plan for them all to go to col­lege? Do any of them have spe­cial needs? How many years left on your mort­gage? What other debts do you have? An ex­pe­ri­enced fi­nan­cial pro­fes­sional will be able to use the an­swers to th­ese ques­tions and oth­ers to help de­ter­mine how much life in­sur­ance you need.

Your next step is to de­cide which type of cov­er­age best fits your needs. Es­sen­tially, your choice is be­tween term in­sur­ance, which of­fers a death ben­e­fit for a spe­cific pe­riod of time, and per­ma­nent in­sur­ance, which can pro­vide life­time pro­tec­tion plus the po­ten­tial to build cash value tax-de­ferred. Keep in mind that all guar­an­tees are based on the claims-pay­ing abil­ity of the is­su­ing in­sur­ance com­pany and that cer­tain fea­tures come at ad­di­tional costs.

There’s no hard-and­fast rule as to which type of cov­er­age to choose. How­ever, when you’re start­ing out in your ca­reer, and your chil­dren are young, you might find that term in­sur­ance could be a cost ef­fec­tive way for cov­er­ing a short-term need (gen­er­ally 20 years or less). On the other hand, if you choose a per­ma­nent in­sur­ance pol­icy, such as whole life or uni­ver­sal life, you can po­ten­tially build cash value that you can ac­cess dur­ing your life on a tax-ad­van­taged ba­sis. Since per­ma­nent in­sur­ance has a cash value com­po­nent, the pre­mi­ums may ini­tially be more costly than those for term in­sur­ance.

Which choice — term or per­ma­nent — is right for you? It de­pends on a va­ri­ety of fac­tors, in­clud­ing your cash flow, your in­vest­ment port­fo­lio and how many years you plan on keep­ing your cov­er­age. Also, you’ll need to re­view your in­sur­ance cov­er­age reg­u­larly to make sure it still meets your needs and ad­dresses any changes in your sit­u­a­tion. A fi­nan­cial ad­vi­sor can help you make the right selections.

Tak­ing steps to­day al­lows you to cel­e­brate Life In­sur­ance Aware- ness Month se­cure in the knowl­edge that you’ve taken the right steps to help pro­tect your fam­ily.

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