Understanding Life Insurance

According to research conducted by the National Association of Insurance Commissioners (NAIC), less than half of young families have life insurance for either spouse that they have purchased on their own.

Recent surveys conducted by the Life and Health Insurance Foundation for Education (LIFE) indicate that approximately 50 million Americans lack the life insurance coverage needed to achieve a secure financial future for their families.

Other LIFE statistics show that only four in 10 adult Americans own individually purchased
life insurance, and among those who do have coverage, most generally don t have enough.
According to LIFE, on average, insured Americans have only three years of replacement income in
their policies.

Decide How Much You Need

The first step to purchasing life insurance is to decide how much coverage you need, for how long and what you can afford to pay. Keep in mind the major reason you buy life insurance is to cover the financial effects of an unexpected or untimely death. Life insurance also can be one of many ways to plan for the future.

Here are some questions to ask before buying:

• How much of the family income do I provide?

• If I were to die, how would my survivors, especially my children, get by?

• Does anyone else depend on me financially, such as a parent, grandparent, brother or sister?

• Do I have children for whom I'd like to set aside money to finish their education in the event of my death?

• How will my family pay final expenses and repay debts after my death?

• Do I have family members or organizations that I would like to leave money?

• Will there be estate taxes to pay after my death?

• How will inflation affect future needs?

People who do not have any dependents and have enough money to cover their final expenses may not need any life insurance.

When considering your coverage, be sure to factor in life insurance you currently have, including group insurance from where you work or veteran's insurance. Don't forget to include benefits from Social Security or survivor's benefits from a pension plan.