What is Life Insurance?

As the health insurance debate rages on in the state and federal government, some consumers may be wondering about another type of insurance. These individuals, including you, may be wondering: Do I need life insurance? The answer to that question depends on whose financial well-being will be most affected by your loss.

Life insurance is basically an investment. You put money into a policy and the benefits are paid out to your loved ones after you are no longer with them. To choose a life insurance policy, you first need to understand some critical facts about life insurance.

Consider Term Life

Term life is the most affordable type of life insurance. It allows you to choose coverage for a set period of time ranging from one to 30 years with some face amounts as low as $5,000. Term life insurance is a wise option if you need more protection than you can afford compared to other forms of life insurance that are costlier such as whole, variable, and universal life. Life insurance is meant to protect your loved ones from financial hardship. It is critically important that you consider what monthly investment fits comfortably into your budget and if that amount will create a strain in case of a financial crisis.

Life Insurance Coverage You Need

After you decide what type of life insurance you need, you'll want to begin considering how much life insurance you want. The idea of life insurance is to take care of your family as if you are still with them financially. For example, if you currently earn $50,000 a year then you'd want enough insurance to provide them with that level of income for the next several years.

The amount of a life insurance policy can be computed in several different ways. You can use the multiplication method which is 3 to 8 times your annual salary. Or you could use a method which takes into account all of the outstanding debt you have right now, including your mortgage and car loans as well as the costs of your children's higher education, and your funeral and/or potential medical expenses.

To determine the method that works best for you and you family it is best to talk to a life insurance broker. At VitalOne, our agents can help you decide how much life insurance you need and can guide you through a number of different options so you can find the best plan at the most reasonable cost.

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