Types of Life Insurance
Q: Who should consider life insurance?
A: If you have others depending on you for support, you probably need life insurance to help them cover expenses and meet future needs. Your beneficiaries can use the death benefit to take the place of your salary, pay for expenses such as day care and tuition, and pay off a mortgage, car loan, or other debts. In addition, people often buy life insurance to help pay expenses at the time of death, such as estate taxes, burial costs, and medical bills.
Q: How much life insurance coverage do I need?
A: A rule of thumb is to buy life insurance equivalent to five to eight times your annual gross income. You should also consider individual factors such as income potential, ordinary expenses, extraordinary expenses, and federal estate taxes.
Q: Will my beneficiaries have to pay income tax on the death benefit?
A: No. Death benefits are tax-free to your beneficiaries. However, if your beneficiaries die before you do, the death benefit will be paid to your estate and may be subject to estate taxes. That's why it's important to keep your beneficiary information up-to-date. It's also a good idea to name a secondary, or contingent, beneficiary in case you outlive your primary beneficiary.
Q: If I don't have any dependents, do I still need life insurance?
A: Even if you have no dependents now, you can lock in lower premium rates for permanent life insurance by buying a policy while you're young. Premium rates are generally determined by age - the younger you are when you buy your policy, the lower your rates will be.
Q: How much will my premiums be?
A: Premium amounts vary from policy to policy. Because premium rates are generally determined by age, the younger you are when you buy your policy, the lower your rates will be. For more specific information about policy costs, request a quote.