Finding a life insurance policy for yourself can be a difficult choice and adding policies for your spouse and children can add an additional layer of complexity, but it’s worth your time and effort.
Having life insurance for your loved ones helps to ensure they have the protection they need in the most difficult circumstances they might face. Here’s how to choose the right life insurance policy for your family.
What is family life insurance?
Family life insurance is any life insurance policy that can cover your family members. It’s not one packaged deal, but individual life insurance policies specific to yourself, spouse, children, parents, and even grandparents.
Several types of life insurance can help algin with each person’s specific needs.
Life insurance for married couples
You can purchase either a joint life insurance policy or separate life insurance policies for you and your spouse. The decision on whether you’d like to get a policy together or not depends on your personal preferences.
Having separate policies allows you to customize your coverage to exactly what you need. Your spouse’s health, age, and income will not affect the price of your premium. A separate life insurance policy also won’t be tied to your marital status. So, if you were to ever part ways, a divorce wouldn’t disrupt your life insurance coverage.
If you purchase a joint life insurance policy, you’ll have one policy and one premium to pay between the two of you. Although this sounds more simplified than a separate policy, joint life insurance does have its limitations. If your significant other has pre-existing health issues, you can pay more for your premiums.
The disbursement of your benefits would also be dependent on who dies first. A first to die policy provides the death benefit after the first spouse dies, while the second to die policy only pays the death benefit after both spouses pass away.
Life insurance for kids
Children are only eligible to have whole life insurance coverage before they’re 18. So, you won’t be able to buy a term life policy for your kids, but whole life offers more advantages for an early adopter. Having a whole life insurance policy for your children guarantees their insurability throughout their lifetime, even if they develop a serious medical condition later in life, locks in low level premiums, and offers an early start on building cash value.
The earlier you start, the sooner your child’s whole life policy can start growing its cash value component. Once they’re adults, they can either continue the policy or tap the cash value to use for large purchases such as supporting their education or buying their first car.
Life insurance for older adults
Older adults in your family like your parents and grandparents should also have life insurance coverage.
Having life insurance will help them leave a clean slate behind after their death. Life insurance for your parents or grandparents will help pay for end-of-life expenses, medical and other debt, and even long-term care, so you don’t have to.
How much life insurance does your family need?
The purpose of having life insurance is to ensure necessary expenses are taken care of at the time of your death. So, to know how much life insurance your family may need, you’ll want to consider what finances you think you’ll need to cover.
- Burial/cremation cost
- Replacing income
- Charitable gifts
- College tuition
- Car payments
- Credit card debt
- Mortgage loan
- Estate taxes
Another way to help you figure out how much life insurance is to buy is to calculate 6-10 times the amount of your annual salary or multiply your salary by how many years you have left to retire. This should give you a robust amount of coverage to keep your loved ones secure