It happens to all of us. This is true, whether you are trying to complete tasks at work or at home. I dare say that we have all come to the end of a day and asked ourselves, “What happened? I didn’t get anything off my list.”
Unfortunately, this phenomenon can negatively impact your family’s finances, as well as your productivity at work or on the home front.
Life insurance is a great example. Discussions and projects related to this sensitive topic are easily sidetracked due to its perceived complexity or general unease surrounding the topic. With that in mind, here is an easy-to-implement four-step process for your family to tackle life insurance.
1. Determine the right amount of coverage
Start with the end in mind. Literally. Understanding what you will need, given your unique situation, if something has happened to you or your significant other is a critical step in making family life insurance decisions. Yes, there are likely to be major financial implications for your family though or of you dead. Things like paying off debts, covering final expenses, raising children and then sending them to college, replacing lost income, and giving yourself or your spouse time to get back on your feet if something happened to the other can have a significant price.
There are online calculators to help you figure out what you need. The VA has one. There is an easy to use calculator on lifehappens.org. And, of course, an insurance agent could help you find the answer.
2. Analyze what you have.
Once you know what you need, it’s time to compare it to what you have. First, for those in uniform, you probably have $ 400,000 from Servicemembers’ Group Life Insurance (SGLI), the military’s group life insurance. Spouses can have family SGLI coverage of up to $ 100,000. Non-military employers typically also provide group coverage. In or out of the military, you can see how a job change could affect your life insurance coverage. This is one of the reasons why it may make sense to diversify the sources of life insurance coverage.
And this is where things can get complicated. You have to choose the type of coverage. What is the right type of insurance? Generally, there are two broad types of coverage, term or permanent.
Temporary needs – those that disappear, such as mortgages and child rearing – are well covered by term insurance. For example, if you have a couple of children, aged 3 and 5, you could purchase a 20-year term policy (this type of policy has a tier premium and death benefit throughout the 20-year period) that would provide cover until your kids are out on their own – knock on the wood.
On the other hand, for a policy you intend to have “forever”, a permanent policy might make sense. For example, there may be an amount of money that you want your spouse or family to have when you are not around or life insurance that is part of complex succession plans or a special needs situation.
Now that you’ve determined what you need and have a close look at what you have, it’s time to …
3. Fill in the blanks
If you’ve crunched the numbers and there are no gaps, neither in quantity nor source, your work is complete for now. On the other hand, if you need additional coverage, it’s time to shop.
A few things to keep in mind while doing this: First, big coverage needs don’t necessarily mean big premium payouts. Life insurance can be surprisingly inexpensive. Second, as I noted earlier, align the type of coverage you buy for with the reason for the coverage. Finally, it is becoming easier and cheaper to purchase life insurance. Digital applications, automated underwriting, technology and data are making it easier and faster to acquire life insurance. Don’t let the fear of the process distract you.
4. Rinse, wash and repeat
The ability to set and forget a strategy or process is enjoyable. Unfortunately, life insurance is not suitable for that type of approach. A new baby, new home, divorce, or job change are all examples of common life events that could change your life insurance situation. Keep this in mind, and when these kinds of things happen, be sure to review your life insurance coverage with these simple steps.
Get the coverage your family needs
FSGLI, TSGLI, VGLI, SGLI … the long list of acronyms and minimum minimums may not be enough to cover your family’s needs. Explore life insurance options with our free tool, which compares rates and matches you with the coverage you want.
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