Financial Directory

Life Insurance Consideration

• You need life insurance policy if you have a spouse, children, or elderly parents who depend on your income.  Here’s what you need to know.

• Buy Renewable Term-Life Insurance:  Term-life insurance is simple and affordable.  Term-life allows you to buy a policy for a set period- anytime from one year to 20 years or more.  You can cancel the policy at anytime.  With renewable term-life, you pay a small premium each year in exchange for pure insurance coverage.  Be sure it has a level premium; that means the annual payments will not go up for the duration of the policy.

Insurance Coverage:  Determine the amount of money the survivors would need to maintain their standard of living until they can take care of themselves.  If your goal is to protect your children, choose a term policy that will give you coverage until your youngest child is 24 years old; by that time, the children can support themselves.

• Choose a Generous Policy:  You need to be sure that you have enough coverage but also keep your insurance premium affordable.  If the survivors require $50,000 a year for living expenses and if the death benefit is invested at the current interest rate of 5 percent, you need a $1,000,000 death benefit policy to get $50,000 annually in pre-tax income without your survivors having to touch the principal.

• Shop on Line:  Check out term-life insurance rates and compare prices.  The premium is based on your age, gender, health, benefit needed, and the term.  A 20-year, $1,000,000 policy for a healthy 40-year-old female cost $850 a year and that is less than $75 a month; that offers valuable protection against financial loss.

• Beneficiary:  Set up a living revocable trust and making the trust, not a person, the beneficiary.  Whomever you have appointed as the trustee will be able to use the funds to take care of your minor child according to the directives you have specified.

• Review Your Policy Periodically:  Assuming you save for your retirement, once you reach 65 years old, you won’t need insurance because you will have sufficient income from your retirement account, pension, and social security.