Do You Have Enough Life Insurance?

A 2016 survey found that two out of five U.S. households have no life insurance protection. And many households who do have insurance think they need a higher level of coverage.1

The most common reason survey respondents gave for not purchasing life insurance was that it was too expensive, yet consumers tend to overestimate the cost.2 If you think you need more coverage or have no coverage at all, it's worth exploring the true costs and available options.

IMAGE

How Much Do You Need?

A common guideline suggests having a policy worth at least seven to ten times the insured's annual salary, but some people may need more. There is no universal formula, and the amount you need depends on your family's living expenses and other sources of income. Your insurance agent can help you assess your needs more comprehensively.

You may have group life insurance through work, but the face value of employer-based policies is generally low — typically one or two times your annual salary. Just as important as the amount of your coverage is the continuity; you might lose coverage if you change employers. An individual policy is yours to keep for as long as you pay the premiums.

Term vs. Perm

Two basic types of individual life insurance are available. Term insurance is generally the most affordable. As the name suggests, this type of coverage offers a death benefit if you die within the covered time period, which could range from one to 30 years. Premiums may adjust each year or remain fixed for the full term. You might be able to continue coverage beyond the original term at a higher premium, or possibly convert to a permanent policy (subject to age restrictions and policy minimums) while the policy is in force.

Permanent life insurance (also called whole life) offers lifetime protection and a guaranteed death benefit as long as you keep the policy in force by paying the premiums. Although the premium is usually higher than for term insurance, it typically remains level for the rest of your life.

A portion of the permanent life insurance premium goes into a cash-value account, which accumulates on a tax-deferred basis throughout the life of the policy. You might be able to borrow against the cash value during your lifetime to help pay for retirement, education, emergencies, or other needs.

Withdrawals of the accumulated cash value, up to the amount of the premiums paid, are not subject to income tax. Loans (as long as they are repaid) are also free of income tax. Loans and withdrawals from a permanent life insurance policy will reduce the policy's cash value and death benefit, and may require additional premium payments to keep the policy in force. Any guarantees are contingent on the financial strength and claims-paying ability of the issuing insurance company.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Policies commonly have mortality and administrative charges beyond the cost of premiums. If a permanent life policy is surrendered prematurely, there may be surrender charges and income tax implications.

 
Twin Cities Retirement Income Planning | Financial Planning Associates
5201 Duncraig Road
Edina, MN 55436
Phone: 952-929-2577 Fax: 952-928-3799

Securities and advisory services offered through Cetera Advisors LLC, member FINRA, SIPC. Cetera is under separate ownership from any other named entity.

1200 S Washington Ave  Suite 270 Minneapolis MN 55415

We are licensed to sell Insurance Products in the following states:  Minnesota, Indiana

We are registered to sell Securities in the following states: California, Minnesota, Iowa, Indiana

 

Financial Planning Associates and Venture  Development Inc. and RE/MAX Results are not affiliated with Cetera Advisors LLC.

This site is published for residents of the United States only. Registered Representatives of Cetera Advisors LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, visit the Cetera Advisors LLC site at www.ceteraadvisors.com

The registered representative(s) and/or investment adviser representative(s) listed on this website are licensed and registered in the following states:

We are licensed to sell Insurance Products in IN,MN.

[ Online Privacy Policy | Important Disclosures | Business Continuity | Privacy Promise | Order Routing Disclosure | Cetera Advisors ]