Life Insurance

Can You Afford to Live Without It?
by Lisa Affolter
Commerce Brokerage Services

What you don’t know about life insurance can hurt you. And many of us, it seems, may not know nearly enough..

Ninety-five million Americans carry no life insurance protection, according to the industry research group LIMRA. Of those who do, 40 percent don’t think they have enough, says a Genworth LifeJacket Study, while eight in 10 admit they aren’t sure how much life insurance they actually need.

Buying life insurance is not as complicated as it might seem. And it could be one of the most important purchases you ever make. The question is: Can you afford to live without it? If you don’t have a policy, or fear you may be underinsured, it may be time you had a conversation about it with an advisor.

Who needs life insurance?
Among the key groups needing life insurance are parents with children living at home. Should parents die before their children are independent, life insurance can provide for their dependents’ financial security, replacing lost income and funding college educations and other needs.

Younger families aren’t the only ones with long-term financial obligations. Some people are tasked with raising grandchildren; others provide care for elderly parents or adults with special needs. Still others run businesses that could face setbacks or close without them.

If you have someone—or something—that you are responsible for protecting, you may need the financial safety net made possible through a life insurance policy. The bottom line: take a close look at your personal circumstances, investment strategies and long-term financial goals, and plan accordingly. Without adequate protection, your financial security may be at risk.

How much do you need?
The amount of life insurance you need depends on many factors: your age and income, the amount of debt you carry, the number of dependents you have, whether or not you wish to fund children’s college educations or leave a financial legacy, your spouse’s employment status, and more. With a needs-based approach like this, the amount of insurance you require may change as your dependents grow and financial responsibilities shift.

Some people, on the other hand, keep things simple by choosing a life insurance policy that is equal to the income it will be expected to replace, or an amount needed for a single, defined purpose, such as burial expenses.

When should you buy it?
Life insurance premiums are determined by your age, gender and health risks. If you buy a policy when you are younger and in good health, you can generally lock into lower premiums. The downside is that you will likely be paying those premiums over a longer timeframe. Conversely, the older you are when you purchase a policy, the higher the annual premium.

What kind to get?
There are many life insurance options. The important thing is to choose the one that best meets the needs of you and your family. Finding the best policy may require answering many questions. Talk to an advisor who can help you explore your options and select the amount and type of life insurance that is right for you. iBi

Lisa Affolter is a financial advisor and senior vice president at Commerce Brokerage Services, Inc.

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