How much life insurance do I need?

There are a few different ways to decide how much life insurance you “need”. A good rule of thumb for many people is 10 to 20 times your gross annual income. This amount of coverage should be enough to replace our lost income should something happen to you. If you are younger, you will likely want more coverage, simply because the money will have to last longer. If you are older, you may need less coverage.

Another approach to answering this question is the “income plus expenses” approach. Using this method, your insurance needs are equal to five times your annual income plus the total of any debt you have (e.g., mortgage, credit cards, auto loans, etc.) plus any special funding needs that you want o provide for (e.g., college funding). So if your income is $50,000, and you have a $200,000 mortgage and no consumer debt, your needs would be $450,000 (5 x $50,000 = $250,000 + $200,000 = $450,000). If you wanted to add $50,000 to this to fund a child’s future college expenses, you would need $500,000.

If you are buying life insurance simply to cover “final expenses” (e.g., funeral costs) you will probably want to have somewhere between $10,000 and $50,000. We also strongly suggest that any insurance coverage that you purchase for final expenses be “permanent coverage” (i.e., Universal Life or Whole Life).

The best way to answer the question “How much life insurance do I need?”

The best way to answer the question “How much life insurance do I need?” is to speak with a qualified professional who can analyze your specific wants and needs. Of course, that describes our team here at Cona Financial Group! Our advisors are exactly that: advisors. We aren’t salespeople. So when we consult with you about your life insurance needs or any other financial matter, we always place your needs first. As financial planners, it is our fiduciary duty and as good people, we consider it our moral and ethical duty as well.

Answering the “How much life insurance do I need” question is one of the most important questions you can answer when thinking about life insurance. We would be happy to help walk you through the process and help you select a policy that is right for you. Feel free to contact us today if we can be of assistance, and don’t forget to try our Life Insurance Needs Calculator too.

How long do I want my coverage to last?

When you are buying life insurance, think about the specific reasons for buying it. Do you want to provide for your family in case something happens to you? Are you looking to create an estate to benefit your favorite charity? Would you like to know that the final expenses associated with your passing are covered so that your surviving family doesn’t have to be burdened with them? Whatever your reasons for buying life insurance are, there is a type of policy designed to cover the need.

If you want coverage to replace your income should something tragic happen to you, a Term Life policy is a good choice. In this case, you may want coverage until your minor children are adults, or until your surviving spouse has reached retirement age. A level term policy can fill these needs. Level term policies are typically available for 10 to 30 years. In addition, you can buy a return of premium (ROP) option which will return all of your premium payments to you at the end of the level term period.

If your needs are more permanent, you will want to consider a Universal Life or Whole Life policy. These types of policies are designed to last for your entire life. Many people choose to buy a “final expense” policy to pay for funeral and other related expenses. A permanent life insurance policy is the right choice here, because you can’t be certain that you won’t outlive any specified term.

Another good use of a permanent policy is for estate planning purposes. If you have illiquid assets like a business or real estate, you may have a use for life insurance in your estate plans. The proceeds (death benefit) from a life insurance policy can add liquidity to your estate, making the division of your assets among your heirs easier. In addition, the cash from a life insurance policy can be used to pay estate taxes–without forcing your heirs to sell valuable assets from your estate.

If you have questions about the length of time you want or need coverage to last, please feel free to contact us. A licensed agent will be happy to assist you.

What is my health class?

There are a number of factors that go into life insurance rates. But once you get beyond age and tobacco use/non-use, there is perhaps nothing as important as your health classification.

Life insurance companies generally have several rate classifications. At the healthiest (and least expensive) end of the spectrum is what insurance companies call “Preferred Plus” or “Preferred Best”. This rate classification is reserved for only the healthiest individuals. Depending on the insurance company, only 5% to 12% of people fall into this category. Athletes and those who pay close attention to their diets often fall into this category.

The second best rate class is call “Preferred”. In order to qualify for this rate class, you have to be free of any major health issues and your build (height and weight) has to be within a certain acceptable limits. You might fall into this group if you take good care of yourself, exercise regularly, and watch what you eat.

Next on the list is a class called “Standard Plus” or “Select”. Usually, individuals that are otherwise healthy but don’t quite have the build for “Preferred” rates will fall into this classification.

Finally, we have “Standard” rates. To qualify for this rate class, you should be relatively healthy with few (if any) health issues. Height and weight requirements are typically relaxed even further than they are for the “Standard Plus” class. With modern advances in medicine, it is now possible for individuals with certain medical conditions to qualify for standard rates. Depending on the type and severity of these conditions, some insurers will underwrite and issue policies as “standard”. Carriers vary by the different conditions that they will allow, but we work with insurance companies that will issue policies as standard for such conditions as: diabetes, high cholesterol, hypertension, history of cancer, asthma, bronchitis, clotting disorders, colitis, depression, anxiety, and epilepsy/seizures.

When you search for rates on our website, take your health class into consideration. If you need some help figuring out what health class you are likely in, feel free to call our office for a free no obligation, no pressure consultation.