LIFE INSURANCE INFORMATION

Along with your savings and investment strategy, life insurance should be part of your long-term financial planning.

You may not like to think about it, but your death can be costly to your loved ones. At the very least, there will be funeral and burial costs. There may also be estate taxes and outstanding debts to pay, such as medical expenses not covered by health insurance. If you have dependents, they will have to cope with these costs while no longer having your income to rely on. The proceeds from a life insurance policy can be of tremendous value at this time. It will provide economic assistance to your family so they can pay off the mortgage, college tuition and other ongoing expenses and maintain their current lifestyle.

There are many choices when it comes to life insurance and over 1,500 insurance companies to choose from, so it is important to work with a knowledgeable insurance agent or company representative.

Why buy life insurance?
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It is generally a cost-effective way to provide for your loved ones after you are gone. It can be an important tool in the following ways: Income replacement For most people, their key economic asset is their ability to earn a living. If you have dependents, then you need to consider what would happen to them if they no longer have your income to rely on. Proceeds from a life insurance policy can help supplement retirement income. This can be especially useful if the benefits of your surviving spouse will be reduced after your death. Pay outstanding debts and long-term obligations Consider life insurance so that your loved ones have the money to offset burial costs, credit card debts and medical expenses not covered by health insurance. In addition, life insurance can be used to pay off the mortgage, supplement retirement savings and help pay college tuition. Estate planning The proceeds of a life insurance policy can be structured to pay estate taxes so that your heirs will not have to liquidate other assets. Charitable contributions If you have a favorite charity, you can designate some of the proceeds from your life insurance to go to this organization.

How much life insurance do I need?
To decide how much life insurance to buy, you need to first figure out what your goals are in purchasing this coverage. Ask yourself the following: Do I want to spare my loved ones funeral costs and outstanding debts? Am I concerned that my spouse will not be able to continue to pay off the mortgage if I die suddenly? Do I have dependents who count on my income? Am I concerned about college savings for my children or retirement savings for my spouse if I die suddenly? While all situations are different, here are two scenarios to help you think through the questions you should pose to your insurance professional: Dependents If you have children, a spouse who does not work outside the home or aging parents who you financially support, you have dependents. Alternatively, you may simply have a spouse who would be unable to pay the mortgage without your financial contribution. In either case, your loved ones will no longer have your income to help them pay the bills and maintain their lifestyle after you are gone. You will have to purchase enough insurance to provide for their future, while considering how much of your budget should be devoted to life insurance. Some insurance experts suggest that you purchase five to eight times your current income. While this may be a good way to begin estimating your family's needs, you will also need to figure how much your dependents will need to pay for some or all the following: Cost of owning a home (mortgage, maintenance, insurance, taxes and utilities) College savings Food, clothing, utilities Child care Nursing home or elder care Retirement savings Funeral expenses and estate taxes Your family may also need extra money to make some changes after you die. They may want to relocate or your spouse may need to go back to school to be in a better position to help support the family. No dependents If you are young and plan to have a family in the future, you may also want to consider purchasing life insurance now so that you can lock in a good rate. Just because you don't have dependents, does not mean you don't have responsibilities. For instance, you may be concerned with not being an economic burden to others if you die unexpectedly. You may also want to leave some money behind to close family, friends or a special charity as a remembrance. In this case, you should purchase enough coverage to pay funeral and burial expenses, outstanding debts and tax liabilities, so that the bulk of your estate goes to your family, friends or charities. Your insurance needs will vary greatly according to your financial assets and liabilities, income potential and level of expenses.