Making Sense of Life Insurance

A critical component of financial planning is Life Insurance. Yet today, 30% of Americans do not have any life insurance coverage, which is the lowest level in over 50 years. Of that percentage, one third have children under the age of 18. Matt Allgeyer, Financial Planner with Wamhoff Financial Planning and Accounting, provides the following tips:


1. Determine what type of life insurance is best for your situation:
• Evaluate how long you will need it, and identify its purpose.
• Term and Whole Life are the two most common types. They serve specific and important purposes.
• Term is a smaller, short-term premium, and covers a certain period.
• Whole Life is normally a long-term, higher premium policy and lasts one’s entire lifetime.


2. Your company provided life insurance is probably not enough
• Though very inexpensive, it is rarely portable, so in a volatile job market, it is important to have personally owned life insurance that stays with you regardless of where you work.
• If you leave your job, voluntarily or involuntarily, you don’t leave yourself without coverage.


3. Critical decisions about life insurance – when, how much, and where.
• Many people decide to buy life insurance after a life changing event – marriage, birth or adoption, divorce, or the purchase of a new home.
• Ask yourself: would anyone be financially devastated if you died prematurely.
• The younger you are when you buy life insurance, the lower the premiums as age and health are factors.
• How much do you need? Most experts suggest three times your income plus debt.
• Because buying life insurance can be an emotional decision, it’s good to get the advice of a financial advisor to help you in your overall planning and give you a range of options


4. Diversify!
• As with your investments, it’s a good idea to diversify your life insurance by purchasing varying amounts of both types – term and whole life.
• Diversification in this manner will help you cover the risks for today while you continue to plan for tomorrow.