| There are a number of
reasons people choose to obtain life insurance coverage.
The one thing all the possible reasons have in common
is that the insurance is to financially protect the
insured’s family or close friends in the case
of an unexpected death.
Deciding exactly why, what kind and how much insurance
to apply for can be difficult to ascertain as it is
something most of us probably have not spent much time
thinking about. After all, thinking about when and how
you could possibly die is not the best way to start
off your day.
The article, “Life
Insurance And Kids: A Matter Of Trust,” written
by Cora Jordan on November 8, 2006 and posted on forbes.com,
explains the how the most common reason to obtain life
insurance may be the trickiest.
“At some time or other, all parents worry about
what will happen to their children if one or both parents
were to die prematurely. Often, life insurance is the
first place parents turn when these worries arise. Although
life insurance may be a good source of income for your
children if you die, before buying a policy you should
carefully consider whether or not you really need it,
what type of policy is best and who should manage the
proceeds on behalf of your children.”
First you need to determine what type, if any, life
insurance you should apply for.
Some insurance salespeople may try to pressure parents
into buying the highest priced insurance plans by exploiting
their fears of premature death.
You should be skeptical when someone is selling you
life insurance since the dollar amount you purchase
coverage for should be tailored for your situation.
No stranger should be able to tell you how much insurance
you need.
So, prior to purchasing a life
insurance policy, consider all possible sources
of income for your children if you were to die and they
were still at the age where they needed financial support.
Some of these sources may include property, Social Security
benefits and grandparents or other
family members.
“If you are wealthy or have affluent relatives
who would step forward if necessary, you need little
or no life insurance. And if, like most folks, you're
struggling to pay for your car's brake job or your kid's
braces, you can't afford to (and shouldn't) divert much
of your current income to cope with the fairly remote
possibility that you may die prematurely.”
As a result, cash
value insurance (whole life, universal life and
variable life) may not be the best option because they
are more expensive than term insurance and offer a lump
sum of money after a predetermined time period (20 or
30 years) or after a certain age (such as 65).
“This lump sum payment is sold as a long-term
savings/investment feature; it does nothing to affect
how much money will be available to your child if you
die in the next few years.”
Then, if you are in good healthy and are relatively
young, you should consider purchasing a decent amount
of term life insurance.
“Younger parents can obtain a significant amount
of coverage for relatively low cost, for the obvious
reason that statistically they are unlikely to die soon,
so the risk to the insurance company is low. It will
provide quick cash for your children if necessary, without
draining your bank account now.”
Purchasing life insurance can be an emotional process.
You need to take your time, do some homework and determine
what will be most beneficial for your children in the
future, while still financially
feasible for you now.
Back to Articles
|
