Have You Reviewed Your Life Insurance Lately
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Have You Reviewed Your Life Insurance Lately?
Summary
When was the last time you took a close look at your life insurance coverage? Life insurance exists to support your family financially if you pass away. It aims to alleviate the financial burden on your beneficiaries, allowing them to use the funds as needed, whether for funeral expenses, mortgage payments, or investments. Importantly, life insurance benefits are typically free from federal tax.
Evaluating Your Coverage
A crucial question when assessing life insurance is: how much coverage do you need? Many financial experts suggest coverage of five to seven times your annual salary. However, since every family has unique goals, it’s essential to evaluate your specific circumstances. Start by assessing your current financial situation and consider future needs. This includes listing current and anticipated expenses and income sources. If you have children, consider the cost of their education and their dependency period. Unfortunately, when the need is greatest, a family might also have the fewest available funds for insurance.
Types of Life Insurance Policies
There are two main types of life insurance policies:
1. Term Life Insurance: This covers you for a specific period, such as 5, 10, 15, 20, or 30 years, and is generally more affordable than permanent insurance. The benefit is paid only if you pass away during the term. After the term ends, you may have the option to convert it to a permanent policy or start a new term, usually at a higher cost.
2. Permanent Life Insurance: This provides lifelong coverage as long as you continue paying premiums, which can be adjusted to fit your needs. Permanent policies include Whole Life, Universal Life, and Variable Universal Life. These policies have a "cash value" component, allowing part of the premiums to accumulate monetary value over time, which is why they cost more than term policies.
Combining Coverages
Combining both term and permanent policies may offer a balanced solution to provide coverage and savings over a lifetime. If you need assistance reviewing your insurance needs, feel free to reach out.
Remember, regularly reviewing your life insurance is key to ensuring your loved ones are protected according to your current and future financial situation.
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