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Term
How
much life insurance should an individual own?
Rough
"rules of thumb" suggest an amount of life insurance equal to 6 to 8
times annual earnings. However, many factors should be taken into account in
determining a more precise estimate of the amount of life insurance needed.
Important factors include income sources (and amounts) other than
salary/earnings, whether or not the individual is married and, if so, what is
the spouse's earning capacity, the number of individuals who are financially
dependent on the insured, the amount of death benefits payable from Social
Security and from an employer-sponsored life insurance plan, whether any special
life insurance needs exist (e.g., mortgage repayment, education fund, estate
planning need), etc. It is recommended that a person's insurance adviser be
contacted for a precise calculation of how much life insurance is needed.
What
about purchasing life insurance on a spouse and on children?
In
certain circumstances, it may be advisable to purchase life insurance on
children; generally, however, such purchases should not be made in lieu of
purchasing appropriate amounts of life insurance on the family breadwinner(s).
It is of utmost importance that the income earning capacity of the primary
breadwinner be fully protected, if possible, through the purchase of the
required amount of life insurance before contemplating the purchase of life
insurance on children or on a non-wage earning spouse. In a dual-earning
household, it is important to protect the income earning capacity of both
spouses. Life insurance on a non-wage earning spouse is often recommended for
the purpose of paying for household services lost at this individual's death.
Should
term insurance or cash value life insurance be purchased?
Although
a difficult question--one whose answer will vary depending on
circumstances--several principles should be followed in addressing this issue.
It must first be recognized that in any life insurance purchasing decision,
there are at least two basic questions that must be answered: (a) "How much
life insurance should I buy?" and (b) "What type of life insurance
policy should I buy?" The question contained in (a) involves an
"insurance" decision and the question contained in (b) requires a
"financial" decision. The "insurance" question should always
be resolved first. For example,
the amount of life insurance that you need may be so large that the only way in
which this needed amount of insurance can be afforded is through the purchase of
term insurance with its lower premium. If your ability (and willingness) to pay
life insurance premiums is such that you can afford the desired amount of life
insurance under either type of policy, it is then appropriate to consider the
"financial" decision--which type of policy to buy. Important factors
affecting the "financial" decision include your income tax bracket,
whether the need for life insurance is short-term or long-term (e.g., 20 years
or longer), and the rate
of return on alternative investments possessing similar risk.
How
does mortgage protection term insurance differ from other types of term life
insurance?
The
face amount under mortgage protection term insurance decreases over time,
consistent with the projected annual decreases in the outstanding balance of a
mortgage loan. Mortgage protection policies are generally available to cover a
range of mortgage repayment periods, e.g., 15, 20, 25 or 30 years. Although the
face amount decreases over time, the premium is usually level in amount.
Further, the premium payment period often
is shorter than the maximum period of insurance coverage--for example, a 20-year
mortgage protection policy might require that level premiums be paid over the
first 17 years .
Can
an existing life insurance policy be used to provide for the repayment of an
outstanding mortgage loan?
Yes;
the purchase of a new mortgage protection term insurance policy is usually not
required by the lender. An existing policy, either term or cash-value life
insurance, can be used for many purposes, including paying off an outstanding
mortgage loan balance in the event of the insured's death.
Credit
life insurances frequently recommended in conjunction with the taking out of
an installment loan when purchasing expensive appliances or a new car, or for
debt consolidation. Is credit life insurance a good buy?
Credit
life insurance is frequently more expensive than traditional term life
insurance. Further, if you already own a sufficient amount of life insurance
to cover your financial needs, including debt repayment, the purchase of
credit life insurance is normally not advisable due to its relatively high
cost.
Jefferson National Quote
- This is a web-based
application process, designed for your use.
- The typical customer is approved and covered in less than 10 minutes.
- Purchase up to $250,000 of level term life insurance, available in 10, 15,
20 and 30 year versions.
- Of course, there's no blood, no urine, and no attending physician
statements.