LIFE INSURANCE FOR YOUNG FAMILIES

By David Fowler

Couples starting families face a myriad of unique challenges. Whether you have recently said “I do,” have a newborn on the way, or are already blessed with children, along with a family comes a variety of financial decisions that must be made. Choosing to buy a house or rent, a public or private education for your children, how much to save for retirement, the list goes on and on. One very important issue that sometimes falls through the cracks is protecting your family with life insurance.

When it comes to evaluating and purchasing life insurance there are four main questions that need to be answered:

1. How Much Life Insurance Do I Need?

The first question you need to answer is how much life insurance should you purchase? This can be answered using a simple methodology or one that is more complex.

One way is to simply ask yourself if something were to happen to you today, how many years would your family need your income to continue? Multiply that by your income. For example, suppose you make $100,000 a year and your youngest child is 12 and you would want your income to continue until she is 22. You could simply multiply $100,000 by 12 years—$1,200,000 of insurance.

A second method would be to use a calculator. A calculator allows you to arrive at a more precise amount that fits your family’s needs. A useful calculator can be found here:

http://www.diversifiedstrategiesllc.com/resource-center/insurance/assess-your-life-insurance-needs

Regardless of how you decide the appropriate insurance amount for you, it is important to make sure the amount you settle on is an amount you can easily afford. At the end of the day—the best life insurance is the one that is in force when you need it.

2. What Kind of Life Insurance Should I Buy?

There are several varieties of life insurance to choose from. Whole Life, Universal Life, Variable Universal Life, Indexed Universal Life, and the list goes on. For young families, Term Insurance is often an appropriate choice. Term Insurance is straight protection—it does not build cash value. It is usually bought with a locked-in guaranteed premium for a set number of years—10, 15, 20, and even 30 years. Term Insurance is just protection so it can give you the most coverage for the least amount of money, which makes it an attractive choice for protecting an income.

3. When Should I Buy It?

If you don’t currently have life insurance or don’t have enough life insurance but have people who depend on your income, you should get on the ball and get life insurance without delay! If you are sticking to an amount you can easily afford (see No. 1 above) there is no reason to hesitate.

4. From Whom Should I Buy From?

In the insurance world there are two main types of life insurance agents—captive and independent. A captive agent sells for one company and usually has to offer that company’s product first—whether it’s the most appropriate product or not. An independent agent works through many different companies to find the product that best fits your needs. This can allow an independent agent to save you time by shopping around for you and of course can save you money as well.