The face value on life insurance policies vary from person to person.There are essentially 2 factors that come into play when obtaining life insurance. The first is the amount of money it would it take for a family to maintain the standard of living to which they currently have and how much a family can afford to pay for insurance premiums each month.
A life insurance policy should depend on the amount of money a family will need to maintain the same standard of living. This means that there is a certain monthly or yearly income needed to pay for minor and major expenses such a mortgage, cars and education. Life insurance needs alter with each situation.If there are young children in the home, it is safe to assume that they will need funds to support them until they are able to pay their own way. The approximate costs of college education must be calculated and added to their other overall expenses, such as for clothing, food, shelter and other necessities must.Additionally, outstanding debts, such as mortgage and car loans must be included in the calculation. Finally, calculate any additional expenses needed to maintain the same standard of life.
You can confer with a financial advisor to help them construct a viable estate plan to ensure security and stability for their beneficiaries.Even during this time when the markets are unpredictable, financial advisors can help their clients put their money in the investments that will yield reasonable returns on their investments each year. An acceptable rule of thumb is to approximate the income taxes on investment returns at 35% to predict yearly income. Divide the annual income by 12 to arrive at the average monthly income. For example, if a family has $8,000 in expenses per month, they will need approximately $3,000,000 in coverage.
This is likely a conservative amount of life insurance as $3,000,000 earning 5% interest yearly equates to $150,000 in annual income.After taxes, the annual income would be around ,000 or ,000 per month.
One should only consider an amount of life insurance cover that requires an annual premium that is affordable. Consumers must be prudent when purchasing a life insurance cover policy. It is essential that they know their limits, because purchasing a policy and having it canceled because they cannot afford the payments will result in a loss of the premiums invested and their beneficiaries will receive no death benefit.
It is relatively easy for consumers to find that happy medium where they are comfortable with the cost of the premiums and the amount of coverage it provides to sustain the same standard of living for their families. Get a free quote today to compare multiple rates from the top carriers.
The first thing you need to do when you start shopping for life insurance is to figure out how much life insurance you really need. There are many ways to determine this. Here are a few:
The Rule of Thumb Method: Take 5 to 7 times your annual gross income and that would be the amount of life insurance coverage you should carry.
The Expense Calculation Method: Add up all your expected expenses should you die, including: expenses for your burial, an emergency cash fund, money to pay your current debts, mortgage, college tuition, and any replacement income needed for your family,. Now, add these all together to determine your total life insurance needs.
The Income Replacement Method: Decide how much of your current annual gross income your family would need for them to maintain their present lifestyle and standard of living. The average is 70% of your current annual income. What you want to do is purchase enough life insurance so that the proceeds, if invested at an after-tax rate of return of 8%, would generate enough income for your family.
Let’s use an example to show you how this works: If you earn $30,000, then your life insurance policy should provide $21,000 of annual income for your family. $30,000 times 70% equals $21,000 of annual income. Now, if your family invests the proceeds of your life insurance policy, they need to receive $21,000 annual income from that investment. $21,000 divided by 8% (rate of return) equals $262,500 of life insurance protection.
I would say that a combination of all three of these methods is best because everyone’s age, health status, and marital and financial situation is different. Be sure to speak with an experienced agent for more guidance on the right amount of life insurance coverage or your family. Get a free quote today.
Term life insurance is usually considered a short term solution (5-30 years) for one or more short term or fixed term needs like a mortgage, car loans, or college funding for your children.
Term insurance makes a lot of sense when you are young with a growing family, because the rates are low and the benefits are high.
- Term insurance is purchased for a specific number of years.
- Premiums are lower than whole life insurance, especially in the early years of the policy.
- Premiums increase with age or at renewal of your policy depending on the type of term life insurance policy you choose.
- Term insurance builds no cash value.
- Based on a study at Penn State University in 1993, less than 1% of term life policies ever pay a death benefit. People usually outlive or discontinue their policy.
- Most term life insurance policies cannot be renewed past the age of 80.
Why Do I Need Term Life Insurance?
Term life insurance offers you a way to provide cash for your family in the event you die. The money your beneficiaries receive from your life insurance policy can be used to pay for your burial costs and final expenses. It can also be used to pay off credit card debt, a mortgage or rent and other living expenses for your family. Life insurance benefits can also be used to pay for college tuition, provide money for retirement, provide cash to pay your estate taxes, or provide a stream of income that can help your family maintain their lifestyle. Also, the death benefit paid from a life insurance policy is usually income tax-free.
If you are thinking about getting some term life insurance coverage for your family, be sure to speak with an experienced agent about your situation. Get a free quote today.
The premium you pay for life insurance is absolutely unique to you. The reason for that is because there are so many factors that play a part of how a carrier determines your life insurance premium. Here’s what affects how much you pay for life insurance.
Age. This is a no brainer- the older you are, the more you pay. That’s why it’s important to lock in a life insurance rate today because as each year passes by, the rate only goes up, up, and up.
Sex. Men pay more for life insurance than women. This is based on actuarial data, which shows women live longer than men. For example, a healthy non-smoking male will pay about $459.00 per year for a $100,000 20 year term policy, while a woman will pay $330.00 per year.
Height and Weight. All life insurance carriers have their own underwriting standards for height and weight. These height and weight tables will put you into a certain health class such as Standard, Preferred, or Preferred Plus, and this plays a big role in what your premium will be. If you are overweight or obese, then you are considered higher risk for heart disease, high cholesterol, and other health issues, so your rate will be higher. Many carriers will deny you for life insurance if you are over the maximum weight allowed according to their underwriting standards.
Smoking Status. If you smoke, you’ll pay more for life insurance. The rates can be as much as 2 or 3 times more. For example, a 52 year old non-smoking male will pay $352.00 per year for a $100,000 20 year term policy. If he smokers he’ll pay $820.00 per year. Big difference!
Blood Pressure and Cholesterol. During the life insurance physical exam, your blood pressure will be checked and your blood will be drawn to check your cholesterol levels. Blood pressure above 140 over 90 is typically considered to be low level hypertension and cholesterol levels above 200 will usually affect your insurance rate. All carriers have their own underwriting guidelines for blood pressure and cholesterol so it’s best to speak with an experienced agent, who’ll be able to guide you toward the carrier who has the most favorable rates for your blood pressure and cholesterol levels.
Health History. This is a big area that can encompass many things. Life insurance carriers want to know about health problems you’ve had, if any. This can include a heart attack, cancer, diabetes, stroke, or just about anything else that you’ve been to a doctor for. This also includes HIV and AIDS. Many people worry about telling their agent about their health issues, but it is always in your best interest to be upfront. Life insurance carriers will check your medical records and prescription history so it is highly likely that they will find out anyway, and you’ll be denied for life insurance if you aren’t upfront. When you disclose everything to your agent, you allow him or her to help you find the best company for your coverage. For example, if you have diabetes, many companies will deny you outright. But there are carriers who will give you as high as a standard rating, depending on your A1C level.
Family Health History. Because health problems often run in the family, life insurance carriers will often ask if your parents or siblings have had heart disease or cancer.
Driving History. Speeding tickets and a DUI can also affect your life insurance rate. Each carrier has their own guideline for what is acceptable.
Occupation and Hobbies. Life insurance carriers view certain occupations and hobbies as high risk, which means you’ll likely pay a higher life insurance premium. Some examples are pilots, rock climbers, sky divers, and scuba divers.
Because there are so many factors that affect your life insurance premium, the only way to get an accurate quote is to speak to an experienced agent. Tell them about any issues you might have and they should be able to guide you in the right direction. Get a free quote today.
