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Do You Have Enough Insurance - and the Right Type?



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By: Provided by Brian Coleman, CFP® and Earl Hull, Edward Jones Investments
Posted: Monday, September 21, 2009 9:46 am
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September has been designated as Life Insurance Awareness Month — so you may want to take this opportunity to learn more about your life insurance needs and determine if you’re adequately covered.

In fact, helping people understand the necessity of being properly insured and the need to seek professional advice regarding those needs is the ultimate goal of Life Insurance Awareness Month, which is coordinated by the nonprofit Life and Health Foundation for Education (LIFE). Some 68 million adult Americans have no life insurance at all, according to LIMRA International, a worldwide association of insurance and financial services companies. And many people with insurance have far less coverage than they need.

If you have loved ones depending on your income, it's important to discuss how life insurance may protect them. But choosing the right amount of coverage, and the right type, is not quite that simple. So let’s take a look at two key questions you need to ask: How much insurance do I need? And what type of insurance is right for me?
There are many factors to consider when determining how much insurance you need. That’s why you’ll need to look at some key variables in your life, such as: How many children do you have? Do you plan for them all to go to college? Do any of them have special needs? How many years left on your mortgage? What other debts do you have? An experienced financial professional will be able to use the answers to these questions and others to help determine how much life insurance you need.

Your next step is to decide which type of coverage best fits your needs. Essentially, your choice is between term insurance, which offers a death benefit for a specific period of time, and permanent insurance, which can provide lifetime protection plus the potential to build cash value tax-deferred. Keep in mind that all guarantees are based on the claims-paying ability of the issuing insurance company and that certain features come at additional costs.

There’s no hard-and-fast rule as to which type of coverage to choose. However, when you’re starting out in your career, and your children are young, you might find that term insurance could be a cost effective way for covering a short-term need (generally 20 years or less). On the other hand, if you choose a permanent insurance policy, such as whole life or universal life, you can potentially build cash value that you can access during your life on a tax-advantaged basis. Since permanent insurance has a cash value component, the premiums may initially be more costly than those for term insurance.

Which choice — term or permanent — is right for you? It depends on a variety of factors, including your cash flow, your investment portfolio and how many years you plan on keeping your coverage. Also, you’ll need to review your insurance coverage regularly to make sure it still meets your needs and addresses any changes in your situation. A financial advisor can help you make the right selections.

Taking steps today allows you to celebrate Life Insurance Awareness Month secure in the knowledge that you’ve taken the right steps to help protect your family.

Brian Coleman
brian.coleman@edwardjones.com
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Member Opinions:
By: AnotherOption on 10/8/09
What's 'permanent' about life insurance if you stop paying your premium?

Term ins is also very affordable past '20 years' if you figure the difference in it and and type of Cash Value insurance (whole life, Universal Life)

if you 'die too soon' you need life insurance and if you live 'too long' you need MONEY.. you should keep your life insurance separated from your investements...

Why would you put it inside a life policy that you have to borrow 'your own money' and pay interest on it and it reduces the payout of your life benefit to your beneficiaries if you die?

You're better off buying inexpensive term insurance and 'blowing' the difference - at least you had the use of the money... or better put it in your cookie jar or under your mattress and get a better return than Cash Valueless insurance...

Or put it in the bank or a real investment, 401k or IRA etc...

Never let your insurance guy sell you a Trash Value policy...

every legitimate consumer advocate or economist will choose term vs trash value ins every single time...

By: BoroBorn on 11/30/09
The main reason insurance agents and planners suggest Whole life is because they make a bigger commission. Term life is the only way to go.


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