Life Insurance

As a general rule, if there are people who depend on you for financial support, like a spouse, children, or aging parents, then you’re a good candidate for life insurance. If you contribute to your household through cooking, cleaning, or childcare, a policy can account for the costs of replacing that labor. Additionally, if you have debt that another person will have to assume, like a mortgage or student loan debts, it's a good opportunity to look into life insurance.

The beneficiary is the person or entity named as the recipient of your policy’s death benefit. It can be a family member, a person unrelated to you, or even a business or other organization. You choose the beneficiary on your own — you don’t need permission from the insurer or the beneficiary. You can also choose more than one beneficiary and designate how you want the death benefit to be split among them, and name contingent beneficiaries in case the primary beneficiaries predecease you.

Your insurer will automatically disburse the death benefit if you die, but it’s still a good idea to tell any beneficiary about the policy so they will be prepared to take action should a problem arise. For this same reason, it’s also a good idea to provide the beneficiary with access to the contract.

Life insurance can be tailored to your specific needs, taking into account your family’s financial picture and your future financial security. The amount of life insurance you need depends on your goals, your family, and the expenses you want your family to be able to cover once you are no longer there to support them.

Here are three separate scenarios to consider:

If you simply want to cover your end-of-life expenses and funeral costs so that your family is not burdened by these expenditures, you might want to buy a small term life policy, such as $10,000 to $20,000 worth of coverage.

You would want to choose a larger life insurance policy if you have dependents and you are the primary income earner for your household. People with dependents often buy term policies in amounts ranging from $500,000 to $2 million or more to ensure that their dependents’ needs will be met. Add your family’s cost of living, your personal and household debt and the projected costs of your children’s education as a starting point to determine the amount of coverage you need.

If you want your life insurance policy to accrue value and work for you or for your family as an investment vehicle, you might want to buy one of several different types of permanent life insurance. In this case, you have several different options. For example, you could purchase a $1 million term life insurance policy and begin converting over portions of the policy to a whole life insurance policy each year to build a growing cash account that will serve your needs in retirement.