How much life insurance do I need?
Dear Friends:
In today’s video, I mentioned that there are two critical questions to ask when determining how much life insurance you need. First is, “How much do I need?” Second is, “How much can I afford?”
Answering the first question depends on understanding that life insurance is a tool God gives us to provide for our families in the event of our death. Often, insurance is sold through fear scenarios that emphasize the need for you to protect your family in all circumstances. Remembering that God is the protector and you serve as a provider within the context of that protection is important for your perspective. Beyond having a solid, biblical perspective, it is important to assess how much you will need, in dollar terms. For a simple, online calculator, visit www.bankrate.com, click on their calculators tab, and locate the life insurance calculator. It will give you a place to start as you decide how much you need.
The second question, “How much can I afford?” leads into a question of term life insurance vs. whole life insurance, and the many insurance tools that are hybrids of those two. Before you buy either type, I encourage you to research the benefits and disadvantages of each. In brief summary, term life insurance provides the maximum coverage for the lowest initial premiums, with premiums increasing annually. (Term is often best for young families.) I typically recommend locking in your term insurance with a guaranteed level premium for 15 to 20 years when you have young children and need maximum life insurance coverage. Traditional whole life insurance gives you permanent coverage (assuming you pay your premiums), and it includes both a death benefit as well as a cash value element. The advantages of whole life are its level premiums as well as the savings you generate through your cash accumulation, over time. However, whole life insurance has a much higher cost than term insurance, especially in the early years.
On the life insurance issue, I encourage you to acknowledge God’s protection for your family, be responsible in providing for your family, and then run the numbers so that you can analyze which type of insurance tool is best for your family.
May God’s peace encourage you as you pursue financial wisdom and depend on His Truth.
Blessings,
Ron
Click here for the video transcript
In today’s video, I mentioned that there are two critical questions to ask when determining how much life insurance you need. First is, “How much do I need?” Second is, “How much can I afford?”
Answering the first question depends on understanding that life insurance is a tool God gives us to provide for our families in the event of our death. Often, insurance is sold through fear scenarios that emphasize the need for you to protect your family in all circumstances. Remembering that God is the protector and you serve as a provider within the context of that protection is important for your perspective. Beyond having a solid, biblical perspective, it is important to assess how much you will need, in dollar terms. For a simple, online calculator, visit www.bankrate.com, click on their calculators tab, and locate the life insurance calculator. It will give you a place to start as you decide how much you need.
The second question, “How much can I afford?” leads into a question of term life insurance vs. whole life insurance, and the many insurance tools that are hybrids of those two. Before you buy either type, I encourage you to research the benefits and disadvantages of each. In brief summary, term life insurance provides the maximum coverage for the lowest initial premiums, with premiums increasing annually. (Term is often best for young families.) I typically recommend locking in your term insurance with a guaranteed level premium for 15 to 20 years when you have young children and need maximum life insurance coverage. Traditional whole life insurance gives you permanent coverage (assuming you pay your premiums), and it includes both a death benefit as well as a cash value element. The advantages of whole life are its level premiums as well as the savings you generate through your cash accumulation, over time. However, whole life insurance has a much higher cost than term insurance, especially in the early years.
On the life insurance issue, I encourage you to acknowledge God’s protection for your family, be responsible in providing for your family, and then run the numbers so that you can analyze which type of insurance tool is best for your family.
May God’s peace encourage you as you pursue financial wisdom and depend on His Truth.
Blessings,
Ron
Click here for the video transcript
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