What Are My Life Insur­ance Needs? 

Life insurance is one of the best investments you can make for your family’s future. But there’s a lot of information about life insurance out there, sprinkled with terms like premium, benefit and cash value…it can be confusing, to say the least.

Here’s some good news — by picking up this article, you’re one step closer to understanding life insurance and making the best, most informed decision you can. We’ll cover the basics of life insurance, dive into the two most common types, and figure out how much insurance you need to guarantee your family’s financial future.

• What is life insurance?
• What kind of life insurance do I need?
• How much life insurance should I buy?

What is life insurance?

Great question. At its most simple, life insurance is protection for the value of your life. Not your life’s actual value, of course — that’s immeasurable. Instead, it’s a replacement for the financial support you provide your family.

There are many different types of life insurance available for purchase; the most common are term life insurance and whole life insurance (also known as permanent life insurance). Although there are other variations out there, for the purposes of this article we’ll focus on these two types of insurance.

First off, all types of life insurance have a few things in common. They all offer a guaranteed death benefit, which is the payment to your loved ones after you die. You can rest assured the policy will be there for your loved ones whenever they need it.

Additionally, both term and whole life insurance give you the option to lock in your premiums (premiums are the payments you make for insurance). In other words, your payments stay the same as they were the day you got your policy. No matter what, the rate you pay for life insurance won’t go up — making it more affordable the earlier you purchase it.

Life insurance is an investment in your family’s future. It’s a promise that your income will be there for your family even when you’re not — and it’s surprisingly affordable if purchased at the right time. Think you understand the basics of life insurance? Let’s take a closer look at two of the most common types, term and whole life insurance.

What kind of life insurance do I need?

There’s a lot to dig into here, so we’ll keep it high level. You shouldn’t need a finance degree to understand the major differences between types of life insurance, but you should know the benefits of each type and which would be best for you.

Whole Life Insurance

When most people think of life insurance, this is what comes to mind — it’s the coverage your parents and grandparents probably had. It’s still around, though, and for good reason. It’s strong coverage that you know will be there when you need it.

Whole life insurance, or permanent life insurance, provides coverage for life — from the moment your policy is approved to the moment you die, you’re covered with a whole life policy. The persistent peace of mind that whole life insurance provides is one reason why people opt for this type of policy.

That’s far from the only reason to choose a whole life policy. Unlike term life, a whole life policy builds cash value over its lifetime — think of it like a savings account that grows after several years. It can be paid to the beneficiary upon your death as an addition to your policy’s face amount benefit, or you can withdraw it earlier in your life as cash. You can even take out a loan against your policy’s value, and unlike a bank loan it won’t affect your credit and will typically offer lower interest rates. Whole life insurance builds cash value on a tax-deferred basis and gives you the option to withdraw or borrow cash.

On top of accruing cash value over the policy’s lifespan, a whole life policy may also give you policy dividends — that is, annual payments to you if your insurance carrier does well. Note that this may only apply to certain types of insurance carriers, including mutual companies like Assurity.

If you’re looking for stable insurance that might offer a higher benefit than the policy’s face amount, a whole life insurance policy may be right for you.

Term Life Insurance

Term life insurance is one of the most affordable types of protection. If you’ve ever had life insurance coverage through an employer, this is probably what it was.

Term life works by protecting you for a certain period of time — or a term. That term can be five to 30 years, or even as short as a single day or week for some specific plans. During that time, you’re protected so long as you continue to pay premiums. If you die during the term that your insurance is in force, your beneficiary receives payment.

But why would you want insurance on a timer? Well, lots of reasons — for instance, you might only need insurance coverage until your kids are finished with college or until you retire. For super short-term insurance, you might only need protection for a single day while you’re traveling – but keep in mind that isn’t the main use of term life insurance. It generally lasts for decades, but many plans allow you to customize the term length.

If term life insurance is appropriate for you now, but you think you could want whole life insurance later, there’s a solution for that. Term life insurance is convertible, meaning you can convert all or just part of the policy face amount into an equal amount of permanent (whole life) coverage.

The last benefit of term life is that it’s the least expensive type of life insurance. Because it doesn’t build cash value and isn’t in force for the entire duration of your life, term coverage is far more affordable than other types of life insurance.

Term life insurance is appropriate for families and individuals who only need coverage for a limited amount of time.

How much life insurance should I buy?

This is the most important question for you to answer. It’s important to balance your insurance needs with your family’s budget to make sure you have the proper amount of coverage.

Keep in mind that whole life insurance will be more expensive than term life insurance, but you should choose whichever type of policy works best for your family and unique circumstances. Some general factors to consider are:

• Your immediate needs (income replacement, final expenses)
• Your ongoing expenses (mortgage, utilities, childcare, credit card debt)
• Your future expenses (education, retirement)
• Any existing insurance (individually owned or through work)
• Other expenses your family is expected to face

Speaking broadly, a safe estimate for life insurance coverage is 7 – 10 times your annual income. Since everybody’s life is different, it might be wise to use an insurance calculator for a more precise estimate of your needs. LifeHappens, a nonprofit dedicated to insurance awareness, has a calculator on their site that can be as in-depth as you’d like.

An insurance professional is also a key resource to help you assess your needs, and now that you’re at this point you may be ready to speak to your local agent. Now that you have an idea of what type of life insurance is right for you, and how much you need, you’ll be better prepared to have this important conversation and secure your future.

For more information before you visit with your insurance professional, take a look at Assurity’s life insurance products.

NOT AVAILABLE IN NEW YORK.

These products may contain reductions of benefits, limitations and exclusions. For costs and complete details of the coverage, please contact your insurance representative or Assurity to review the policy for more information.

Policy Form Nos. I L0880, I L1702 and I L1419 underwritten by Assurity Life Insurance Company, Lincoln, NE.

Assurity is a marketing name for the mutual holding company Assurity Group, Inc. and its subsidiaries. Those subsidiaries include but are not limited to: Assurity Life Insurance Company and Assurity Life Insurance Company of New York. Insurance products and services are offered by Assurity Life Insurance Company in all states except New York. In New York, insurance products and services are offered by Assurity Life Insurance Company of New York, Albany, NY. Product availability, features and rates may vary by state.