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Life insurance is commonly misunderstood. If you have a policy, it’s probably one offered through your employer which you haven’t thought much about. But you may have wondered how life insurance benefits you and your family, if you have an adequate amount or if you can afford more. To help you answer these questions and more, here are some facts to clear up any misconceptions you may have.


You have a lot of choices about how to spend your money and where. Allocating part of your budget toward the purchase of life insurance may just give you that firm foundation for pursuing many of your future financial goals.


“Isn’t life insurance only for after I’m gone?”

Life insurance protects the financial goals you have for your family — whether you are alive or not. Some life insurance policies accumulate cash values to further help you protect your goals during your lifetime. Choose a policy that can help you with your retirement income goals, fund your children’s (or grandchildren’s) education or prepare for the unexpected.


“Is life insurance really something I can afford?”

You buy auto and homeowner’s insurance to protect these valuable assets. Why not protect the asset that is you for those who depend on you? Financial protection through life insurance comes with many affordable options depending on your age, health and type of policy you choose. Plus, if you choose a cash value life insurance policy, you may enhance your other assets over the long term.


“Should I buy term or whole life insurance?”

Initially, term life insurance costs less than whole life, but costs can increase over time. Whole life costs never increase, guaranteed. Term life covers you and your family for a specific period of time, such as throughout your mortgage period. Whole life insurance can provide benefits during your lifetime and after you’re gone. It may make good financial sense to purchase both.


“Don’t I only need enough life insurance to cover my current daily expenses?”

Your income may cover the car payment, mortgage and utility bills, but you provide greater value with the many ways you personally care for your family. No one can replace you, but life insurance can give your family the financial means for filling some gaps beyond daily expenses, such as having to hire someone to do what you did during your lifetime.


“Should I purchase life insurance equal to twice my annual income?”

Life insurance calculators  can provide a general sense of how much coverage you should have for yourself and your family. Consulting with a financial professional can provide a more detailed and holistic estimate. However, there is no magical formula for determining the exact life insurance amount to purchase.


“Is the group insurance I receive at work all the life insurance I need?”

Group life insurance from your employer is a great benefit and it can help provide income your family would need if something should happen to you. However, in most cases, if you lose your job, quit or retire, you will lose your coverage. Often, you can only convert a portion of your group life coverage to permanent insurance.


“Can people in poor health qualify for life insurance?”

No one should assume coverage would be denied based on an existing health condition. Insurance companies assess risk on an individual basis. Individuals may have the option to obtain coverage at a higher premium. There’s no way to know without completing the evaluation process.


“I am young so why would I need life insurance?”

First, life insurance costs less for younger individuals. Establish life insurance coverage before unexpected health concerns might limit your ability to have the coverage you might need.


Second, most people think about buying life insurance to cover mortgage expenses if they die. But, it can also accumulate a cash value to help with a future home purchase or a daughter’s wedding — while you’re alive.


“I am the homemaker, not the breadwinner. Why would I need life insurance?”

Both of you add economic value to your family. Together you create and maintain a standard of living. If, for example, the homemaker unexpectedly dies, the working spouse must carve out more time or more resources for household upkeep and child care. But, life insurance can provide the necessary income to sustain your family through these kinds of adjustments.


“We’re retired empty nesters and our mortgage is fully paid. Do we really need life insurance?”

Depending on the type you choose, life insurance may provide living benefits to help you get the most out of retirement. As an asset, its cash value can be a backup to your other money in annuities and qualified plans. Whatever you don’t need represents your legacy — use it to preserve your estate or send your grandchildren to college.


Note: Life insurance should be purchased by individuals that have a need to provide a death benefit to protect others with insurable interests in their lives against financial loss. Life insurance is not a retirement plan, investment, or savings account. Life insurance policies’ cash values are not considered liquid.


Withdrawals and loans from a life insurance policy reduce the life insurance policy’s death benefit and cash value. Cash value policy loans are taxable if the policy is surrendered or terminates before the insured's death and the cash value exceeds the policy's cost basis.


Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice.