Top Ten Tips on Life Insurance

No one knows what the future may hold, but you can do your best to prepare, starting with the Straight Story on Life Insurance. These Ten Tips provide straight answers to frequent questions about life insurance.

1. If you have dependents — you need it
If you have children or people who depend on the money you earn, you need life insurance. Its primary purpose is to protect your income. Life insurance helps those you care about keep on living as they would if you were still earning a paycheck.

2. Life Insurance helps replace your paycheck if you aren't there to earn it
It is commonly accepted among financial professionals that 60% of annual income times years to retirement gives you a reasonable estimate of the amount of life insurance to buy. It takes your salary, assumes some normal raises over time, and adds the value of your employee benefits, like healthcare. Then it subtracts the effect of taxes, and what it costs your family to have you around.

3. Some life insurance is better than no life insurance
Some life insurance is better than no life insurance. A good starting place is coverage that equals outstanding debt (including mortgage, car payments and student loans) + 5 years of annual salary. Use the average American salary, $40,000, to represent your income in the estimate above if you're a stay-at-home parent or currently in-between jobs.

4. Life insurance is less expensive than you think
Many people think life insurance is much more expensive than it is. In fact, many people can get term coverage from a quality company for a surprisingly low price.  Life insurance does get more expensive as you get older. It makes sense to buy as much as you need while you're young and healthy.

5. Life insurance is a smart financial move
To get the amount of coverage we recommend, you can expect to pay about 1% of your annual salary on the annual cost of term life insurance. (Spending 1% of your income to protect years of income is a pretty good deal.)

6. Make sure you know how much life insurance you get at work
Many people assume they have more coverage at work than they really do. We recommend that people look carefully at the amount of coverage they get, then buy additional life insurance, either through their benefits plans at work or on their own, to make sure they have the right amount of coverage for their unique needs.

7. Life insurance needs change over time
Life insurance needs change over time, because of things like new family members, a new job, a move, or even a raise at work. Review your protection every year during the benefits enrollment period at work or when you receive your Social Security statement in the mail.

8. Term Insurance is an easy and inexpensive way to get started
Term life insurance offers more coverage for less money. It is an easy and cost-effective way to get protection in the short run. Because term insurance runs out at the end of the term, use it to protect needs that you can anticipate—like paying off a mortgage or funding college for your children.
On the other hand, permanent life insurance can also be an important part of your lifetime financial plan. It's flexible, and can help you meet a number of important goals, including protecting your income, building equity, providing an additional source of retirement income, and leaving a financial legacy for your loved ones. You can supplement retirement income by taking loans or withdrawals from accumulated cash value (although the policy's cash value and death benefit are reduced by the amount taken, plus any loan interest charged).

9. The financial strength and reputation of the company you buy it from matters
When choosing a life insurance company, the financial strength and reputation of the company you select is the key consideration, to ensure guarantees1 are kept. Ask around, and do some research before you buy. (Publicly-traded life insurance companies are required report on their financial condition 4 times a year.)

10. There is no substitute for good advice
The more you know about life insurance basics, the more control you have over deciding what's right for you. To get the right answers, some people prefer talking to a trained financial professional, while others favor doing research online or in the press. Whatever way works best for you, taking action to protect your family with the right amount of life insurance coverage is an important part of your lifetime financial plan.
Many people recognize the need for life insurance, but they don't take the next step because they feel they don't have a safe, pressure-free place to start. Start here. No one will call you, unless you ask. And you can always call on us.

1 Guarantees apply to certain insurance and annuity products (not securities, variable or investment advisory products) and are subject to the insurer's claims-paying ability and financial strength. Insurance quotes are estimates based on information that you supply, not firm quotes or offers. Your actual premium will be based on complete underwriting and may differ from these quotes. Insurance coverage may not begin until underwriting approval, the policy has been issued, and all necessary outstanding requirements including payment have been received.