September is Life Insurance Awareness Month. I know, we aren’t quite there yet. But the whole point of being insured is being ahead of events, right?
We all know that Life Insurance and the need for it is the last thing anyone wants to think about. But Life Insurance Awareness is not meant to be a stark reminder of our mortality. It is also not just a month to learn all about what life insurance is and how it works, although we all could use a refresher on that.
Life Insurance Awareness Month is a reminder of the necessity of fitting the right amount of life insurance into your financial plans for the future, right now!
There is no one “right amount” but to come to the right amount for you, think of the reason you carry life insurance – your loved ones. The real “Awareness” part of Life Insurance Awareness comes in answering a couple of questions:
- “Would they be covered right now if I were not here?”
2. “How secure will they be financially going forward?”
Last year, a study by Life Happens and LIMRA revealed that about one-third of Americans think their family would struggle to pay the bills the first month after the loss of one of the “bread winners.” This means that they are underinsured.
If you are an American adult, there is a 40% chance that you have zero life insurance coverage. If you have any, odds are you only have about 35-60% of the coverage that authorities on the subject would recommend. Some experts recommend that you multiply your annual salary by eight to reach the amount of life insurance you should have. While this is always entirely up to you, Horihan Insurance is here to guide you to what is best for you.
To answer the question “Would my loved ones be covered?” there are a few things to consider:
- How much do you make per month? – Insurance amounting to any less than that (plus the amount of final expenses) exposes your family to some financial risk. Also, remember that even a stay-at-home parent needs life insurance. Should that parent pass away, an added cost for child care could be a significant problem to solve.
2. How many dependents do you have? Obviously the larger your family, the more coverage you should have.
3. What is in your family’s near future? Right now, with your current income and budget, you’re probably right on track to be able to send your son or daughter away to the college of their choice in a few years. Would your life insurance policy translate to a clear path toward your child’s goals if you were to die in the meantime?
4. Is one of your children likely to be married in the coming years? Often parents set aside a chunk for such occasions. Beyond that, making sure your life is insured is the best way to “be there” for them on their special day even if you can’t be there.
5. If you, yourself, recently got married or divorced, or if you’ve recently celebrated the birth of a child or your kids have moved out, these should be considerations when determining the amount of insurance you need.
Many people ask agents “Do I need life insurance?” If you have dependents or plan to, then you need it. If that is you, and you are looking at life insurance for the first time, it can be confusing. You’ll probably encounter phrases like “Term Life”, “Whole Life”, “Permanent Life”, and “Universal Life”. While your local Horihan Insurance agent will go through the details with you in person, here’s some clarification on a couple of things to get you started:
- First off, Whole and Permanent are the same thing. The perks of this type are consistent premiums, and guaranteed accumulation of value, just maybe not as much as other types.
- Term Life is generally the lower premium type if that is a major consideration for you, so make sure you’re comparing “apples to apples.” A $75,000 term policy is not the same thing as a $75,000 universal policy.
- Universal Life is more flexible as far as premium payments, but fluctuations may affect the cash value.
The last piece of advice we can offer is: Educate yourself. Know the terminology. Once you have that knowledge, it is well worth taking the time to discuss the options with a Horihan Insurance agent.
The security is certainly worth the time it takes and the money you’ll put into it.