Financial focus: Do you have adequate life insurance? | Local News

You probably won’t see it on your calendar, but September is Life Insurance Awareness Month. And it is indeed important to be aware of the importance of life insurance. Are you sufficiently insured?

Many people are not. According to a 2021 survey by research and advocacy groups LIMRA and Life Happens, about 40% of Americans face some type of life insurance shortfall, either because they are uninsured or under -insured.

The need for life insurance is quite simple: if something were to happen to you, would your family be able to continue living the same way? Would the mortgage still be paid? Could your children still continue their studies?

So if you decide to acquire or strengthen your life insurance, how much do you need? Your employer may provide you with insurance as a benefit, but that may not be enough. You may have heard that you should have coverage for seven or eight times your annual salary. But this estimate is just that – an estimate. Everyone’s situation is different and there really is no single formula that can tell you how much insurance you need. To determine what coverage you need, you’ll need to consider several factors, including your age, number of dependents, your and your spouse’s income, and the amount of your mortgage.

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It’s obviously important to know the amount of coverage you need, but you’ll also need to determine what type of life insurance is right for you. You have two basic choices: term or permanent insurance.

As the name suggests, term insurance provides coverage for a fixed term, such as 10, 20, or 25 years. Term insurance only provides a death benefit – there is no cash value accumulation in your policy. Generally speaking, term insurance is considered quite affordable, especially when one is young.

Permanent insurance, on the other hand, offers a death benefit and the ability to create cash value. For this reason, premiums for permanent insurance — which includes “whole life” or “universal life” — are significantly higher than those for term life insurance.

What type of insurance to choose? Again, it all depends on your situation and preferences. Some financial experts advise people to “buy term and invest the difference”, that is, to use the money saved on lower term insurance premiums to invest in stocks and bonds. mutual fund. Others, however, disagree and point to the benefits of permanent insurance, such as the ability to borrow against a policy’s cash value to pay for unexpected expenses. Ultimately, deciding between term and permanent insurance will require you to look at your overall financial situation to determine which option is best for you.

In fact, life insurance should be a key part of your overall financial strategy, along with your investment mix and any long-term goals you’ve set for yourself. Insurance can even play a role in your estate planning, as you determine how best to distribute assets to family members and charities you support.

Life Insurance Awareness Month lasts 30 days, but your need for life insurance can last for decades. Be sure to do everything you can to protect your loved ones.

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