Life Insurance FAQ
Q: How much life insurance should an individual own?
A: "Rule of thumb" suggests an amount of life insurance equal to 8 to 10 times annual earnings. However, many factors should be taken into account when determining the right amount of life insurance for you and your family.
Important factors include:
· Income sources and amounts other than salary earnings
· Whether or not you are married and, if so, what is your spouse’s earning capacity
· The number of individuals who are financially dependent upon you
· The amount of death benefits payable from social security and an employer-sponsored life insurance plan
· Whether any special life insurance needs exist - (mortgage repayment, education fund, estate planning need, etc.)
Calculating the correct amount of life insurance to buy is not as simple as it appears. We recommend calling us at: (847) 680-0888 or sending us an email at firstname.lastname@example.org, to help determine the right amount of coverage you need.
Q: What about purchasing life insurance for a spouse or children?
A: In certain circumstances, it is advisable to purchase life insurance for children. However, generally such purchases should not be made in lieu of purchasing appropriate amounts of life insurance on the family breadwinner(s).
It is of utmost importance that the income-earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance. This should be done before purchasing life insurance for children or on a non-wage-earning spouse. Life insurance on a non-wage-earning spouse is often recommended for the purpose of paying for household services lost due to this individual’s death. In a dual-earning household, it is important to protect the income earning capacity of both spouses.
Q: Should term insurance or cash value life insurance be purchased?
A: This depends on your personal circumstances.
First, recognize that in any life insurance purchasing decision, two questions must be answered:
1. "How much life insurance should I buy?"
2. "What type of life insurance policy should I buy?"
The first question should always be initially resolved. For example, the amount of life insurance that you need may be so large that you can only afford it through the purchase of term insurance, since term insurance has a lower premium.
If your ability to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, then it is appropriate to consider the second question — what type of policy to buy. Important factors affecting this decision include your income tax bracket, whether the need for life insurance is short-term or long-term (e.g., 20 years or longer), and the rate of return on alternative investments possessing similar risk.
Illinois and Wisconsin residents, at R Hobbs Insurance Agency, we can work with you to make sure you've got the coverage you need, while at the same time using all possible credits and discounts to make that coverage affordable. Just give us a call at (847) 680-0888 or send us a note at email@example.com. We want to help you meet your goals, and make sure what's important to you is protected!