Many Purposes for Life Insurance
Life insurance is far more than just a decision of how much to buy. Depending on your financial situation, life insurance can be used for a variety of purposes, such as estate planning, accumulating cash, transferring wealth, achieving estate tax liquidity. Life insurance is like auto insurance in that you can buy a lot of it or not very much of it. Life insurance differs from auto insurance in that, depending on the type of policy you buy, you can pay a lot or a little for basically the same death benefit. Keep in mind, though, that the younger and healthier you are, the less you will pay for coverage. Life insurers like to have their policyholders around for a long, long time.
So how much life insurance do you need? It depends. One common benchmark says your death benefit should be about six to eight times your annual earnings, but there are a variety of factors to consider such as other income sources, the size of your family, whether your spouse works and the number of people who are financially dependent on you in addition to any special needs such as mortgages and college education funds. Whatever type of policy you buy, make sure it provides enough of a death benefit to meet your family’s needs if you aren’t there. Don’t lose sight of this number.
Do you know which type of policy is best for you? I can say that there are more than 2,000 companies selling life insurance in the United States. As a result, you have thousands and thousands of options. This makes it even more imperative that you have a trained insurance professional analyze your financial situation and determine what kind of policy, from which insurer, is best for you.
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