Finding the Right Amount of Life Insurance

life insurance apple valley mnBe sure you know the different types of life insurance options available before selecting yours!

When purchasing life insurance, the question isn’t really how much you need, but how much capital your family will need at the time of your death. This depends on two variables:

  • How much will be needed at death to meet immediate obligations? (eg. uncovered medical bills, funeral costs, outstanding debts, mortgage balance, etc.)
  • How much future income is needed to sustain the household? (eg. the total “present value” of cash-flow streams your family will need after your death)

There are different types of life insurance policies to be aware of:

Term
This provides life insurance protection for a specific length of time at a fixed rate. If you were to die during the provided coverage time, term policies pay out in a lump sum to the beneficiaries. Most terms last between one and 30 years, and premiums are generally less expensive if you buy while you’re healthy and young.

Whole
Otherwise known as a permanent policy. It is not defined by a specific term length, but it pays a guaranteed benefit to your beneficiaries when you die, and generally accrues a cash value over time through interest. This policy is exempt from income tax and the premiums normally stay the same over your lifetime. The cash portion can be withdrawn for an investment such as your kid’s college education, a spouse’s timely retirement, or mortgage payments.

Universal
This is referred to as a flexible premium or adjustable life insurance. This is not limited to a set term and usually has cash accumulation too. In this policy, the premiums, cash values, and coverage limits may increase or decrease during the lifetime of the policy. Usually, the adjustments can be made after life milestones or as your needs change.

To determine the best life insurance policy for your needs, budget, and loved ones, contact Mayer Insurance. Our professionals in Apple Valley, Minnesota understand the importance of securing a reliable policy that will protect your finances and your family, all in one.