Introduction:Let me preface this list by saying that I am not in the insurance business. I will neither earn any commission nor refer you to an insurance company. I merely want to help you decide for yourself if life insurance is a smart choice or a waste of money. Also, if you decide that it is suitable for you, this should help you to make wise choices in the type and amount of coverage.
Whether or not you need life insurance depends, in large part, on your situation.
If you are a young, single, non-smoker that has no children and rents a home, you are less likely to need life insurance. If you are married with children, own your own home and make regular mortgage payments, and your family relies heavily on your income, life insurance makes a lot of sense for you.
If you decide that life insurance is right for you, continue reading...
The next decision to make is the choice between term and whole life insurance. To do that you will want to understand the difference. I will sum it up for you, but I suggest doing some research of your own before talking with an agent.
Whole life insurance is called such because it really is intended to cover you for your entire life. These are the plans that you might see advertisements for that are targeted at new parents. The idea is to start a plan for your baby - someone with a statistically long life expectancy - and pay the premiums until the 'child' is able to pay them and continue for the rest of his or her life. As the child ages, the premiums may increase to reflect the higher risk. Starting a plan later in life will always cost more in premiums. The insurance company will invest a portion of the funds that you pay in premiums. The value of your plan grows over time. Because of this, the insurance company's liability is reduced - the investments will cover your death benefit. An additional 'benefit' to whole life is that you, the plan holder, are able to take out a loan against the plan's value. You still need to pay it back (with interest), though, in order for your plan to keep its value.
Term life is intended to cover the prime money-earning years of your life. This tends to coincide with the years that you would be making regular mortgage payments. Because you are only paying for the actual insurance, the premiums are considerably less than they are for comparable whole life coverage. This allows you to make investments for yourself should you so desire.
By nature of the policy, an Increasing Benefit Rider generally only applies to term life insurance. Whole life, through the investments, already grows in value. Term life is locked in at the value it starts with - unless you have an IBR.
An IBR allows for an increase in the cost of living. With an IBR, the death benefit will increase by 5-10% every year over the life of the policy. Of course, the premiums will also go up, but usually only by a dollar or two per month.
Again, your personal situation will help you make the decision on an IBR. If have a family but no mortgage, you may not need to worry about it. As well, if you can afford the premiums for suitable coverage at the time of signing, there may be no need to increase it over time. On the other hand, if you are looking for insurance but can't afford much to start, an IBR can be very helpful.
It is dependent upon your financial obligations to determine adequate life insurance coverage. Some agents will recommend having coverage in the amount of ten times your annual income - especially if you are the primary money-earner. The theory being that your beneficiary will be able to deposit the death benefit into an interest bearing account and - potentially - live off of the interest comfortably. At the minimum, managed wisely, the death benefit can replace your lost income for up to 10 years.
Ten times your annual income may be cost-prohibitive. I would recommend that you have at least enough coverage to pay off any outstanding debt including your mortgage. This will allow your beneficiary to settle those debts without any hardship in addition to losing you.
Bottom line, get as much coverage as you can comfortably afford.
If you have made the decision to take out a life insurance policy, you should do so for all of your family members. If your spouse works, but is not the primary earner, they should still be covered. Also, while children are not contributing to the total income, it is still a good idea to insure them.
If your spouse dies, you will certainly want to be able to replace their income. It is a good idea to follow the 10X rule for coverage.
It is also a good idea to insure each child for at least one year's total household income. This will provide for adequate mourning time for you and your spouse should your child die. Knowing that you will not be forced to return to a job immediately after the loss of a child or spouse contributes to your peace of mind.
As stated, I am not an insurance agent and am not able to answer specific questions about insurance options. You would need to find a licensed agent regarding the laws in your locality.
One final bit of advice: shop around. Find the right deal for you.
The last life insurance salesperson I met wasn't convinced of their own services enough to even call me silly for my weak rebuttal. They were only in it for the commission,but didn't believe in their own product. If they'd have just told me I sounded ridiculous, I'd have been sold.
select one here...